Problem 7-20 Evaluating the Profitability of Services [L07-2, L07-3, 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 $22.65 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 Measure Activity Cost Pool Cleaning carpets I ravel to iobs Job support Other (costs of idle capacity and Activity for the Year 11,000 hundred square feet Square feet cleaned (00s) Miles driven Number of iobs 254,500 miles 1,800 jobs organization-sustaining costs) None Not applicable The total cost of operating the company for the year is $321,000, which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenseS Office expenses President's compensation $135,000 24,000 7,000 27,000 56,000 72,000 Total cost $ 321,000