PROBLEM 7-19 Evaluating the Profitability of Services D Cleaning is a small, family-owned business operating out of Bozeman, Montana. any has always charged a flat fee per hundred square feet of carpet t fee is $28 per hundred square feet. However, there is some question about the comp cleaned. The curren whether the company is actually making any money on jobs for some cus those located on remot 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 e ranches that require considerable travel time. The owner's daughter, home Activity forss Activity Cost Pool Cleaning carpets Travel to jobs Other (costs of idle capacity and Activity Measure .Square feet cleaned (00s) 20,000 hundred Miles driven Number of jobs square feet 60,000 miles 2,000 jobs organization-sustaining costs) he total cost of operating the company for the year is $430,000, which includes the follow ing costs $150,000 40,000 Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost 80,000 60,000 80,000 Resource consumption is distributed across the activities as follows: stribution of Resource Consumption Across Actiy 70% 100% 80% 10% 096 20% 40% 55% 60% 100% 100% 100% 100% 100% 100% Cleaning equipment depreciation .. Vehicle expenses 096 0% 45% 40% President's compensation Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. 1. Using Exhibit 7-5 as a guide, prepare the first-stage allocation of costs to the activity cost pools. 2.: Using Exhibit 7-6 as a guide, compute the activity rates for the activity cost pools. 3. The company recently completed a 500-square-foot carpet-cleaning job at the Flying N ranch-a 75-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 $140 (500 square feet@ $28 per hundred square feet). Using Exhibit 7-11 as a guide, prepare a report showing the margin from this job. 5 What do you conclude concerning the profitability of the Flying N ranch job? Explain. 6. What advice would you give the president concerning pricing jobs in the future