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Problem 7-20 (Algo) Evaluating the Profitability of Services [LO7-2, LO7-3, LO7-4, LO7-5] Gallatin Carpet Cleaning has always charged a flat fee per hundred square feet
Problem 7-20 (Algo) Evaluating the Profitability of Services [LO7-2, LO7-3, LO7-4, LO7-5] Gallatin Carpet Cleaning has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $14.05 per hundred square feet. However, there is some question about whether the company is making a profit on jobs requiring considerable travel time. The owner's daughter suggested answering this question by designing an activity-based costing system using the information shown below: The total cost of operating the company for the year is $357,000 which includes the following costs: She distributed these operating costs across her four 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: 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 200-square-foot carpet-cleaning job at the Flying N Ranch-a 53-mile round-trip from the company's home office. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $28.10 (200 square feet @$14.05 per hundred square feet). Calculate the customer margin earned on this job. Prepare the first-stage allocation of costs to the activity cost pools
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