Rio Carpet Cleaning is a small, family-owned business operating out of Springville, Utah. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 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 Cost Pool Activity Measure Activity for the Year 20,000 hundred square feet Cleaning carpets Travel to jobs Job support Square feet cleaned (00s) Miles driven Number of jobs 60,000 miles 2,000 jobs Other (costs of idle capacity and None Not applicable organization-sustaining costs) The total cost of operating the company for the year is $430,000, which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost Resource consumption is distributed across the activities as follows: $150,000 40,000 20,000 80,000 60,000 80,000 $430,000 Distribution of Resource Consumption Across Activities Cleaning Travel to Carpets Jobs Job Support Other Total Wages 70% 20% 0% 10% 100% Cleaning supplies 100% 0% 0% 0% 100% Cleaning equipment depreciation 80% 0% 0% 20% 100% Vehicle expenses 0% 60% 0% 40% 100% Office expenses 0% 0% 45% 55% 100% President's compensation 0% 0% 40% 60% 100% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required 1. Using Exhibit 1 as a guide, prepare the first-stage allocation of costs to the activity cost pools. (5 points) 2. Using Exhibit 2 as a guide, compute the activity rates for the activity cost pools. (5 points) 3. The company recently completed a 500-square-foot carpet-cleaning job at the Flying N ranch - a 75-mile round-trip journey from the company's offices in Draper. Compute the cost of this job using the activity-based costing system. (5 points) 4. The revenue from the Flying N ranch was $140 (500 square feet @ $28 per hundred square feet). Using Exhibit 3 as a guide, prepare a report showing the margin from this job. (5 points) 5. What do you conclude concerning the profitability of the Flying N ranch job? Explain. (5 points) 6. What advice would you give the president concerning pricing jobs in the future? (10 points)