MetaGallatin 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 $$23\mathrm{.}30$ per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers$$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 consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

Activity Cost Pool Activity Measure Activity for the Year

Cleaning carpets Square feet cleaned $(00$s$)12,000$ hundred square feet

Travel to jobs Miles driven $431,000$ miles

Job support Number of jobs $1,700$ jobs

Other $($organization$-$sustaining costs and idle capacity costs$)$ None Not applicable

The total cost of operating the company for the year is $$354,000$ which includes the following costs:

Wages $ $146,000$

Cleaning supplies $26,000$

Cleaning equipment depreciation $8,000$

Vehicle expenses $30,000$

Office expenses $68,000$

President$$s compensation $76,000$

Total cost $ $354,000$

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities

Cleaning Carpets Travel to Jobs Job Support Other Total

Wages $80\%14\%0\%6\%100\%$

Cleaning supplies $100\%0\%0\%0\%100\%$

Cleaning equipment depreciation $72\%0\%0\%28\%100\%$

Vehicle expenses $0\%82\%0\%18\%100\%$

Office expenses $0\%0\%59\%41\%100\%$

President$$s compensation $0\%0\%26\%74\%100\%$

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on$.$

Required:

$1.$ Prepare the first$-$stage allocation of costs to the activity cost pools.

$2.$ Compute the activity rates for the activity cost pools.

$3.$ The company recently completed a $200$ square foot carpet$-$cleaning job at the Flying N Ranch$$a $54-$mile round$-$trip journey from the company$$s offices in Bozeman. Compute the cost of this job using the activity$-$based costing system.

$4.$ The revenue from the Flying N Ranch was $$46\mathrm{.}60(200$ square feet @ $$23\mathrm{.}30$ per hundred square feet$).$ Calculate the customer margin earned on this job.

$30$

points

eBook

Print

Complete this question by entering your answers in the tabs below.

Required $1$

Required $2$

Required $3$

Required $4$

Prepare the first$-$stage allocation of costs to the activity cost pools.

$\backslash$table$[[,\backslash$table$[[$Cleaning$],[$Carpets$]],\backslash$table$[[$Travel to$],[$Jobs$]],$Job Support,Other,Total$],[$Wages$,,,,,$$$,0],[$Cleaning supplies,,,,,,$0],[$Cleaning equipment depreciation,,,,,,$0],[$Vehicle expenses,,,,,,$0],[$Office expenses,,,,,,$0],[$President$\text{'}$s compensation,,,,,,$0],[$Total cost$,$$$,$$$,$$$,$$$,$$$,0]]$