Problem 7-20 (Algo) Evaluating the Profitability of Services [LO7-2, LO7-3, LO7-4, LO7-5] 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 $23.40 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 Cleaning carpets Activity Measure Square feet cleaned (00s) Miles driven Number of jobs Other (organization-sustaining costs and idle capacity costs) None Travel to jobs Job support Activity for the Year 10,000 hundred square feet 228,500 miles 1,700 jobs Not applicable The total cost of operating the company for the year is $351,000 which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses office expenses President's compensation Total cost $ 138,000 29,000 15,000 34,000 55,000 80,000 $ 351,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Job Support Other Total Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 70% 10% 0% 20% 100% 100% 0% 0% 0% 100% 72% 0% 0% 28% 100% 0% 84% 0% 16% 100% 0% 0% 58% 42% 100% 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