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value 5.00 points Problem 7-20 Evaluating the Profitability of Services [LO7-2, LO7-3, LO7-4, L07-5] 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 $28 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, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year 20,000 hundred square feet Cleaning carpets Travel to jobs Job support Other (costs of idle capacity Square feet cleaned (00s) Miles driven 60,000 miles 2,000 jobs Number of jobs and organization-sustaining costs) None Not applicable The total cost of operating the company for the year is $430,000, which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation $150,000 40,000 20,000 80,000 60,000 80,000 Total cost $430,000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption Across Activities Cleaning Travel to Job Othe 10% 0% 20% 40% 55% 60% Support Total 100% 100% 100% 100% 100% 100% CarpetsJobs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 70% 100% 80% 0% 0% 0% 0% 0% 60% 0% 0% 0% 0% 0% 0% 45% 40% Job support consists of receiving calls from potential customers at the home office, scheduling jobs billing, resolving issues, and so on