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Problem 7-20 Evaluating the Profitability of Services [LO7-2, LO7-3, LO7-4, LO7-5] Gallatin Carpet Cleaning is a small, family owned business operating out of Bozeman, Montana For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $24.00 per hundred square feet. However there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system con four activity cost pools. The activity cost pools and their activity measures appear below Activity Cost Pool Cleaning carpets Travel to jobs ob support Other (organlzation-sustaining costs and Idle Activity Measure Activity for the Year Square feet cleaned (80s) Miles driven 12,500 hundred square feet 237,500 miles Number of jobs 1,800 jobs capacity costs) Not applicable None The total cost of operating the company for the year is $366,000 which inciudes the following costs ages Cleaning suppiies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost s 1se,eee 1,000 7,000 35,e00 61,000 82,800 5 366,000