Gallatin Carpet Cleaning is a small, family - owned business operating out of Bozeman, Montana. For its
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Gallatin Carpet Cleaning is a small, familyowned 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 $ 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 owners daughter, home for the summer from college, has suggested investigating this question using activitybased 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 PoolActivity MeasureActivity for the YearCleaning carpetsSquare feet cleaned shundred square feetTravel to jobsMiles drivenmilesJob supportNumber of jobsjobsOther organizationsustaining costs and idle capacity costsNoneNot applicableThe total cost of operating the company for the year is $ which includes the following costs:Wages$ Cleaning suppliesCleaning equipment depreciationVehicle expensesOffice expensesPresidents compensationTotal cost$ Resource consumption is distributed across the activities as follows:Distribution of Resource Consumption Across ActivitiesCleaning CarpetsTravel to JobsJob SupportOtherTotalWagesCleaning suppliesCleaning equipment depreciationVehicle expensesOffice expensesPresidents compensationJob support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so onRequired: Prepare the firststage allocation of costs to the activity cost pools Compute the activity rates for the activity cost pools The company recently completed a square foot carpetcleaning job at the Flying N Rancha mile roundtrip journey from the companys offices in Bozeman. Compute the cost of this job using the activitybased costing system The revenue from the Flying N Ranch was $ square feet @ $ per hundred square feet Calculate the customer margin earned on this job.
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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