Problem $7-20($Algo$)$ Evaluating the Profitability of Services $[$LO$7-2,$ LO$7-3,$ LO$7-4,$ LO$7-5]$

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 $$23\mathrm{.}15$ 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:

The total cost of operating the company for the year is $$366,000$ which includes the following costs:

Resource consumption is distributed across the activities as follows:

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

on$.$

Required:

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

Compute the activity rates for the activity cost pools.

The company recently completed a $600$ square foot carpet$-$cleaning job at the Flying N Ranch$-$a $50-$mile round$-$trip journey from

the company's offices in Bozeman. Compute the cost of this job using the activity$-$based costing system.

The revenue from the Flying $N$ Ranch was $$138\mathrm{.}90(600$ square feet @$$23\mathrm{.}15$ per hundred square feet$).$ Calculate the customer

margin earned on this job.