Problem 7-20 Evaluating the Profitability of Services [LO7-2, L07-3, L07-4, L07-5] 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 $23.90 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customersparticularly 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 Cost Pool Cleaning carpets Travel to jobs Job support Other (costs of idle capacity and organization-sustaining costs) Activity Measure Square feet cleaned (00s) Miles driven Number of jobs Activity for the Year 14,500 hundred square feet 301,000 miles 1,900 jobs None Not applicable The total cost of operating the company for the year is $361,000, which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation $ 149,000 23,000 12,000 37,000 55,000 85,000 Total cost $361,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Carpets Jobs Wages 79% 13% Cleaning supplies 100% 0% Cleaning equipment depreciation 68% Vehicle expenses 0% 78% Office expenses 0% President's compensation 0% 0% Job Support 0% 0% 0% 0% 57% 30% 0% Other 8% 0% 32% 22% 43% 70% Total 100% 100% 100% 100% 100% 100% 0% 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. Job Cleaning Carpets Travel to Jobs Support Other Total i Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Activity Rate per hundred square feet Cleaning carpets Travel to jobs Job support per mile per job 3. The company recently completed a 4 hundred square foot carpet-cleaning job at the Flying N ranch-a 57.00-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate and final answers to 2 decimal places.) Cost of the job 4. The revenue from the Flying N ranch was $95.60 (4 hundred square feet at $23.90 per hundred square feet). Prepare a report showing the margin from this job. (Round your intermediate calculations and final answers to 2 decimal places.) Gallatin Carpet Cleaning Customer MarginActivity-Based Costing Amounts per Job Costs