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only requirement 3 Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a
only requirement 3
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 $22.55 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, nas 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 (cos) 13,500 hundred square feet Travel to jobs Miles driven 121,000 miles Job support Number of jobs 2,000 jobs Other (organization-sustaining costs and idle capacity costs) Not applicable None The total cost of operating the company for the year is $349,000 which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 146,000 25,000 7,000 28,000 64,000 79,00 $ 349,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption across Activities Cleaning Travel Carpets to Jobs Wages Job Support Other 74% 15% ex 11% Cleaning Supplies 100% ex OX 0% Cleaning equipment depreciation 74% ex Ox 26% Vehicle expenses GX 76% ex 24% Office expenses ex ex 61% President's compensation 39% es ex 29% 71% Total 100% 100% 100% 100% 100X 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 400 square foot carpet-cleaning Job at the Flying N Ranch-a 52-mile round-trip Journey from the company's offices in Bozeman Compute the cost of this job using the activity-based costing system Step by Step Solution
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