Gallatin Carpet Cleaning is a small, family-owned business operating out of Boze
ID: 2390530 • Letter: G
Question
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 $22.80 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 Job support Other (organization-sustaining costs and Activity Measure Square feet cleaned (00s) Miles driven Number of iobs Activity for the Year 14,500 hundred square feet 400,500 miles 1,900 jobs idle capacity costs) None Not applicable The total cost of operating the company for the year is $365,000 which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 135,000 30,000 17,000 40,000 62,000 81,000 $ 365, 000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Job Other 14% 0% 30% 17% 40% 74% Total 100% 100% 100% 100% 100% 100% Support Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 71% 100% 70% 0% 0% 0% 15% 0% 0% 83% 0% 0% 0% 0% 0% 0% 60% 268 Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so onExplanation / Answer
Part 1
Customer margin = revenue - Costs = 91.20-76.33 = 14.87
(costs is calculated Below in part 4)
Part 2
95850
(135000*71%)
20250
(135000*15%)
0
(135000*0%)
18900
(135000*14%)
30000
(30000*100%)
0
(30000*0%)
0
(30000*0%)
0
(30000*0%)
11900
(17000*70%)
0
(17000*0%)
0
(17000*0%)
5100
(17000*30%)
0
(40000*0%)
33200
(40000*83%)
0
(40000*0%)
6800
(40000*17%)
0
(62000*0%)
0
(62000*0%)
37200
(62000*60%)
24800
(62000*40%)
0
(81000*0%)
0
(81000*0%)
21060
(81000*26%)
59940
(81000*74%)
Part 3
Part 4
Cost of the job = (4*9.50)+(0.13*59)+(30.66*1) =76.33
Cleaning carpets travel to jobs job support other total Wages95850
(135000*71%)
20250
(135000*15%)
0
(135000*0%)
18900
(135000*14%)
135000 Cleaning supplies30000
(30000*100%)
0
(30000*0%)
0
(30000*0%)
0
(30000*0%)
30000 Cleaning equipment depreciation11900
(17000*70%)
0
(17000*0%)
0
(17000*0%)
5100
(17000*30%)
17000 Vehicle expenses0
(40000*0%)
33200
(40000*83%)
0
(40000*0%)
6800
(40000*17%)
40000 Office expenses0
(62000*0%)
0
(62000*0%)
37200
(62000*60%)
24800
(62000*40%)
62000 President's compensation0
(81000*0%)
0
(81000*0%)
21060
(81000*26%)
59940
(81000*74%)
81000 Total 137750 53450 58260 115540 365000Related Questions
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