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 $2225 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 for the Year Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (ees) -13,500 hundred square feet 300,000 miles 1,700 jobs Miles driven Number of jobs None Not applicable The total cost of operating the company for the year Is $347,000 which Includes the following costs: $ 144,00e Wages Cleaning supplies cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 32,000 8,e0e 26, e00 56,eee 81, eee S 347,e0e Total cost Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs 11 Job Support Other Total Carpets 78% wages Cleaning supplies Lleaning equipment depreciation Vehicle expenses 11% 1eer 100% es zex 81% 19% OFfice expenses 64% 36% 1ees President's compensation 33% 67% 1e0x Job support consists of recetving calls from potential 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 200 square foot carpet-cieaning Job at the Flying N Ranch-a 55-mile round-trlp journey from the company's offices In Bozeman. Compute the cost of this (ob using the activity-based costing system
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 $2225 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 for the Year Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (ees) -13,500 hundred square feet 300,000 miles 1,700 jobs Miles driven Number of jobs None Not applicable The total cost of operating the company for the year Is $347,000 which Includes the following costs: $ 144,00e Wages Cleaning supplies cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 32,000 8,e0e 26, e00 56,eee 81, eee S 347,e0e Total cost Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs 11 Job Support Other Total Carpets 78% wages Cleaning supplies Lleaning equipment depreciation Vehicle expenses 11% 1eer 100% es zex 81% 19% OFfice expenses 64% 36% 1ees President's compensation 33% 67% 1e0x Job support consists of recetving calls from potential 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 200 square foot carpet-cieaning Job at the Flying N Ranch-a 55-mile round-trlp journey from the company's offices In Bozeman. Compute the cost of this (ob using the activity-based costing system
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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