Gore Range Carpet Cleaning is a small, family-owned business operating out of Eagle-Vail, Colorado. For its services,
Question:
The total cost of operating the company for the year is $340,000, which includes the following costs:
Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000
Cleaning supplies . . . . . . . . . . . . . . . . . . . . . . 25,000
Cleaning equipment depreciation . . . . . . . . . . 10,000
Vehicle expenses. . . . . . . . . . . . . . . . . . . . . . . 30,000
Office expenses . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Presidents compensation . . . . . . . . . . . . . . . . 75,000
Total cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $340,000
Resource consumption is distributed across the activities as follows:
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 85 as a guide, prepare the first-stage allocation of costs to the activity cost pools.
2. Using Exhibit 86 as a guide, compute the activity rates for the activity cost pools.
3. The company recently completed a 6 hundred square-foot carpet-cleaning job at the Lazy Bee Rancha 52-mile round-trip journey from the companys offices in Eagle-Vail. Compute the cost of this job using the activity-based costing system.
4. The revenue from the Lazy Bee Ranch was $137.70 (6 hundred square-feet at $22.95 per hundred square feet). Using Exhibit 811 as a guide, prepare a report showing the margin from this job.
5. What do you conclude concerning the profitability of the Lazy Bee Ranch job? Explain.
6. What advice would you give the president concerning pricing jobs in thefuture?
Step by Step Answer:
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer