ck Your Work- Google Chrome to.mheducation.com/hm.tpx 10.00 points Gallatin Carp
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ck Your Work- Google Chrome to.mheducation.com/hm.tpx 10.00 points 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 cument fee is $22.80 is a small, family owned business operating out of Bozeman. Montana. For its per hundred square feet However, there is some question about whether the , is actually making any money on jobs for some customers-particularly those loc.ated on remote el time. The owner's daughter, home for the summer from college, ranches that require considerable trav has suggested investigating this question using activity-based costing After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below Activity for the Y Activity Cost PoolActivity Measure Cleaning carpets Travel to jobs Job suppot Other (costs of idle capacity and Square feet cleaned (00s) 13,500 hundred square feet Miles driven 56,500 miles Number of jobs 1,700 jobs Not applic able organiz ation-sustaining costs) None The total cost of operating the company for the year is $352 000, which includes the following costs $ 149.000 34 000 Cleaning equipment depreciation 6.000 27,000 64,000 72,000 Cleaning supplies Vehicle expenses Office expenses President's compensation Total cost $ 352,000 Resource consumption is distributed ac ross the activities as follows Distribution of Resource of Resource Consumption Across Activities Clearing Travel to ·Job Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses 100% 74% 0% 0% 0% 11% 0% 0526% 23% 43% 67% 100% 100% 100% 100% 100% 100% 0% 77% 0% 0% Job support consists of receiving 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 poolsExplanation / Answer
1
First stage allocation of Costs to the activity costs pool:
Cleaning carpets
Travel to Jobs
Job Support
Other
Total
Wages
$ 110,260
$ 22,350
$ 16,390
$ 149,000
(149000*74%)
(149000*15%)
(149000*11%)
Cleaning supplies
$ 34,000
$ 34,000
(34000*100%)
Cleaning equipment depreciation
$ 4,440
$ 1,560
$ 6,000
(6000*74%)
(6000*26%)
Vehicle expenses
$ 20,790
$ 6,210
$ 27,000
(27000*77%)
(27000*23%)
Office expenses
$ 36,480
$ 27,520
$ 64,000
(64000*57%)
(64000*43%)
President's compensation
$ 23,760
$ 48,240
$ 72,000
(72000*33%)
(72000*67%)
Total cost
$ 148,700
$ 43,140
$ 60,240
$ 99,920
$ 352,000
2
Calculation of Activity rates for the activity cost pools:
Activity cost Pool
Allocated cost
Activity measure
Total Activity
Activity rate
A
B
A/B
Cleaning carpets
$ 148,700
Square feet cleaned (00s)
13500
$ 11.01
per hundered Square feet
Travel to Jobs
$ 43,140
Miles Driven
56500
$ 0.76
per mile
Job Support
$ 60,240
Number of Jobs
1700
$ 35.44
per job
3
Calculation of Cost of Job:
Activity cost Pool
Total Activity
Activity rate
Cost
A
B
A*B
Cleaning carpets
4
$ 11.01
$ 44.04
Travel to Jobs
59
$ 0.76
$ 44.84
Job Support
1
$ 35.44
$ 35.44
Total Cost for the Job:
$ 124.32
4
Galletin Carpet Cleaning
Customer Margin - Activity Based Costing
Amounts per job
Revenue
91.2
Costs:
Cleaning carpets
$ 44.04
Travel to Jobs
$ 44.84
Job Support
$ 35.44
Total costs
$ 124.32
Margin
$ (33.12)
1
First stage allocation of Costs to the activity costs pool:
Cleaning carpets
Travel to Jobs
Job Support
Other
Total
Wages
$ 110,260
$ 22,350
$ 16,390
$ 149,000
(149000*74%)
(149000*15%)
(149000*11%)
Cleaning supplies
$ 34,000
$ 34,000
(34000*100%)
Cleaning equipment depreciation
$ 4,440
$ 1,560
$ 6,000
(6000*74%)
(6000*26%)
Vehicle expenses
$ 20,790
$ 6,210
$ 27,000
(27000*77%)
(27000*23%)
Office expenses
$ 36,480
$ 27,520
$ 64,000
(64000*57%)
(64000*43%)
President's compensation
$ 23,760
$ 48,240
$ 72,000
(72000*33%)
(72000*67%)
Total cost
$ 148,700
$ 43,140
$ 60,240
$ 99,920
$ 352,000
2
Calculation of Activity rates for the activity cost pools:
Activity cost Pool
Allocated cost
Activity measure
Total Activity
Activity rate
A
B
A/B
Cleaning carpets
$ 148,700
Square feet cleaned (00s)
13500
$ 11.01
per hundered Square feet
Travel to Jobs
$ 43,140
Miles Driven
56500
$ 0.76
per mile
Job Support
$ 60,240
Number of Jobs
1700
$ 35.44
per job
3
Calculation of Cost of Job:
Activity cost Pool
Total Activity
Activity rate
Cost
A
B
A*B
Cleaning carpets
4
$ 11.01
$ 44.04
Travel to Jobs
59
$ 0.76
$ 44.84
Job Support
1
$ 35.44
$ 35.44
Total Cost for the Job:
$ 124.32
4
Galletin Carpet Cleaning
Customer Margin - Activity Based Costing
Amounts per job
Revenue
91.2
Costs:
Cleaning carpets
$ 44.04
Travel to Jobs
$ 44.84
Job Support
$ 35.44
Total costs
$ 124.32
Margin
$ (33.12)
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