Gallatin Carpet Cleaning is a small, family-owned business operating out of Boze
ID: 2519988 • 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 $22.20 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 $350,000, which includes the following costs:
Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Job support consists of receiving calls from potential customers at the home office, scheduling
jobs, billing, resolving issues, and so on.
and organization-sustaining costs) None Not applicable 1. Prepare the first-stape alocation of costs so the soivity cost pools. eiviy Carpecs Sspport Wages 2 Compube tha acovity rates for tha acivity cost pools. Round your answars to 2 decimal places. Clesning carpete 3. The company re enty oompeted 4 hnd e square oat oa pe o ean g ob a tne F in N an 1 Om e un ip oumey from the o m an s ott oes n ce man. ?? p te the cost ot thajot us g the act it as o tr system our d your inte mediate and final ansoers to de nal places . The revenuc from the Flying N ranch was $88.80(4 hundred square feet a: $22 20 per hundred square feet). Prepare a report showing the margin from this job (Round your intermediate calaulations and final answwers to 2 decimal places. Gallatin Carpet Cleaning Custome Costing
Explanation / Answer
1. First Stage Allocation of Costs to the Activity Cost Pools:
2.
3.
Cost of the job = 4 x $ 10.04 + 51 x $ 0.19 + $ 30.84 = $ 40.16 + $ 9.69 + $ 30.84 = $ 80.69
4. Gallatin Carpet Cleaning
Customer Margin : Activity Based Costing
Cleaning Carpets Travel to Jobs Job Support Other Total Wages 119,200 14,900 0 14,900 $ 149,000 Cleaning Supplies 21,000 0 0 0 21,000 Cleaning Equipment Depreciation 5,440 0 0 2,560 8,000 Vehicle Expenses 0 24,360 0 4,640 29,000 Office Expenses 0 0 34,800 23,200 58,000 President's Compensation 0 0 23,800 61,200 85,000 Totals 145,640 39,260 58,600 106,500 350,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.