Gallatin Carpet Cleaning is a small, family-owned business operating out of Boze
ID: 2473411 • 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 $23.70 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, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below:
The total cost of operating the company for the year is $368,000, which includes the following costs:
Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Prepare the first-stage allocation of costs to the activity cost pools.
The company recently completed a 4 hundred square foot carpet-cleaning job at the Flying N ranch—a 58.00-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate and final answers to 2 decimal places.)
The revenue from the Flying N ranch was $94.80 (4 hundred square feet at $23.70 per hundred square feet). Prepare a report showing the margin from this job. (Round your intermediate calculations and final answers to 2 decimal places.)
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 $23.70 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, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below:
Explanation / Answer
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Gallatin Carpet Cleaning Margin from the job
Cleaning Carpet Travel to Jobs Job Support Other Total Wages 146,000*79% =$115,340 146,000*13% = $18,980 0 146,000*8% = $11,680 $146,000 Cleaning supplies $23,000 0 0 0 23,000 Cleaning equipment depreciation 11,000*74% = $8,140 0 0 11,000*26% = $2,860 11,000 Vehicle expenses 0 37,000 * 83% = $30,710 0 37,000*17% = $6,290 37,000 Office expenses 0 0 69,000*62% = $42,780 69,000*38% = $26,220 69,000 President’s compensation 0 0 82,000*29%= $23,780 82,000*71% = $58,220 82,000 Total Cost $146,480 $49,690 $66,560 $105,270 $368,000Related Questions
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