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 $22.05 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 Cost Pool Cleaning carpets Travel to jobs Activity Measure Square feet cleaned (88s) Activity for the Year 14,80e hundred square feet 402, 5ee miles 2,800 jobs Miles driven Job support Other (organization-sustaining costs and idle capacity costs) Number of jobs None Not applicable The total cost of operating the company for the year is $362,000 which Includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation $ 143,eee 34, 800 14,eee 28, ৪ee 58, e0e 85,eee Total cost 362,8e0 Resource consumption is distributed across the activities as follows: Distribution of ReSource Consumption Across Activities Cleaning Caгpets Travel to Jobs Job Support Other Total wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses 75% 1e% e% 15% 1eex 1e0% ex e% 10e% 72% e% 28% 1eez ex 84% ex 16% 1eex e% 59% 41% 1ee% President's compensation 30% 7e% 100% Job support consits of recelving calls from potentlal customers at the home office, scheduling Jobs, billing, resolving Issues, and so
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 $22.05 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 Cost Pool Cleaning carpets Travel to jobs Activity Measure Square feet cleaned (88s) Activity for the Year 14,80e hundred square feet 402, 5ee miles 2,800 jobs Miles driven Job support Other (organization-sustaining costs and idle capacity costs) Number of jobs None Not applicable The total cost of operating the company for the year is $362,000 which Includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation $ 143,eee 34, 800 14,eee 28, ৪ee 58, e0e 85,eee Total cost 362,8e0 Resource consumption is distributed across the activities as follows: Distribution of ReSource Consumption Across Activities Cleaning Caгpets Travel to Jobs Job Support Other Total wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses 75% 1e% e% 15% 1eex 1e0% ex e% 10e% 72% e% 28% 1eez ex 84% ex 16% 1eex e% 59% 41% 1ee% President's compensation 30% 7e% 100% Job support consits of recelving calls from potentlal customers at the home office, scheduling Jobs, billing, resolving Issues, and so
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 89TA
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Question
ch5_hw_qa3_part3_br
Transcribed Image Text:Required 1
Required 2
Required 3
Required 4
The company recently completed a 800 square foot carpet-cleaning job at the Flying N Ranch-a 56-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 calculations and final answer to 2 decimal places.)
Cost of the job
Transcribed Image Text: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 $22.05 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 Cost Pool
Cleaning carpets
Travel to jobs
Activity Measure
Square feet cleaned (88s)
Activity for the Year
14,000 hundred square feet
402, 500 miles
2,800 jobs
Miles driven
Job support
Number of jobs
Other (organization-sustaining costs and idle
capacity costs)
None
Not applicable
The total cost of operating the company for the year is $362,000 which includes the following costs:
143,000
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
34, 000
14,000
28, 000
Office expenses
58, 000
President's compensation
85, 900
Total cost
362,000
Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Cleaning
Travel
Carpets
to Jobs
Job Support Other
Total
75%
1e%
e%
15%
1eex
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
100%
ex
100%
72%
28%
100%
e%
84%
16%
1eex
Office expenses
e%
e%
59%
41%
100%
President's compensation
e%
30%
70%
10e%
Job support consists of recelving calls from potentlal 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 800 square foot carpet-cleaning Job at the Flying N Ranch-a 56-mle round-trip journey from
the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system.
4. The revenue from the Flying N Ranch was $176.40 (800 square feet @ $22.05 per hundred square feet). Calculate the customer
margin earned on this Job.
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