Gallatin Company is a small family-owned carpet cleaning service business in Bozeman, Montana. The company charges $28 per hundred square feet for its work. The owners daughter suggested that Activity Based Costing would help them to understand which customers are better for the company. She designed a simple system with three activity pools, as described below.

a) Prepare the first stage allocation of costs to activity pools

b) Compute the activity rates

c) Assume a customer had 500 sq. ft. of carpet cleaned. It was a 75 mile round trip to the customer from the offices. Find the net operating income for the job

Gallatin Company is a small family-owned carpet cleaning service business in Bozeman, Montana. The company charges $28 per hundred square feet for its work. The owner's daughter suggested that Activity Based Costing would help them to understand which customers are better for the company. She designed a simple system with three activity pools, as described below. Activity Measure Sq. feet Cost Pool Cleaning carpets Travel to jobs Job Support Miles driven Activity for the year 2,000,000 sq. ft. 60,000 miles 2,000 jobs Not applicable Other Number of jobs None -not allocable as organization sustaining The costs of operating the company are as follows: Wages $150,000 cleaning $60,000 vehicles $80,000 office $60,000 President compensation $80,000 Resource consumption is as follows: Cleaning carpets Travel to jobs wages 70% 20% Job support other 10% 90% 10% 60% 40% cleaning vehicles Office President compensation 45% 55% 40% 60%