Problem 7-20 Evaluating the Profitability of Services [LO7-2, LO7-3, LO07-4, 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 $22.10 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 Measure Square feet cleaned (00s) Miles driven Number of jobs Activity for the Year 7,500 feet 1,800 jobs Not applicable Activity Cost Pool hundred square Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle 72,000 miles capacity costs) None The total cost of operating the company for the year is $345,000 which includes the following costs $136,000 25,000 Wages Cleaning supplies Cleaning equipment depreciation 10.000