Evaluating the Profitability of Services LO7-2, LO7-3, L07-4, 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 $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, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear in the pictures below: Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 4. The revenue from the Flying N Ranch was $140 (500 square feet @ $28 per hundred square feet).Using Exhibit 7-12 as a guide, calculate the customer margin earned on this job.
PROBLEM 7-20 Evaluating the Profitability of Services LO7-2, LO7-3, L07-4, 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 $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, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear in the pictures below:
Job support consists of receiving calls from potential customers at the home office, scheduling
jobs, billing, resolving issues, and so on.
Required:
4. The revenue from the Flying N Ranch was $140 (500 square feet @ $28 per hundred square
feet).Using Exhibit 7-12 as a guide, calculate the customer margin earned on this job.
5. What do you conclude concerning the profitability of the Flying N Ranch job? Explain.
6.What advice would you give the president concerning pricing jobs in the future?
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