Gallatn Carpet Cleaning is a small, famly-owned business operating out of Bozema

Question

Gallatn Carpet Cleaning is a small, famly-owned business operating out of Bozeman, Montana For its services, the comparny has always charged a fat tee per hundred square leet of carpet cleaned. The current foe is $23 45 per hundred square leet However, there is some question about whether the company is actualy making any money on jobs for some customers-particularly those located on remole ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigaing this question using activity based costing After some discussion, a simplk system consisting of tour actvity cost pools seemed to be adequate. The activity cost pools and their actvity measures appear below Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (costs of idlo capacity and Activity Measure Square feet cleaned (00s) Mles drven Number of jobs 10,500 hundred square feet 274,500 mles 1,700 jobs organization sustaining costs) Not applicable The total cost ot operating the company for the year is $373,000, which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation 16,000 Vehicle expenses 145,000 35,000 Office expenses President's compensation 28.000 69 000 82,000 Total cost 373,000 Resource consumpton is distibuted across the activities as follows

Explanation / Answer

Req 1 STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF Cleaning Travel to Jobs Job Support Others Total APPORTION IN $ IN $ IN $ IN $ IN $ Wages 72:12:0:16 104,400 17,400 0 23,200 145,000 Cleaning Supplies 100:0:0:0 35,000 0 0 0 35,000 Depreciation 70:0:0:30 11,200 0 0 4,800 16,000 Vehicle expense 0:83:0:17 0 21,580 0 4,420 26,000 Office expensne 0:0:56:44 0 0 38,640 30,360 69,000 Presidents compensation 0:0:28:72 0 0 22,960 59,040 82000 TOTAL COST OF ACTIVITY 150,600 38,980 61,600 121,820 373,000 Req 2: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Cleaning Sq. ft cleaned 150,600 10,500 14.34 per 100 sq. ft Travel to job Miles driven 38,980 274,500 0.14 per mile Suport Numbere of jobs 61,600 1,700 36.24 per job Req 3: Cost of Job Flying-N ranch Cleaning (600 @ 14.34 per 100 sq. ft) 86.04 Travel to Job (106 miles @$0.14) 14.84 Support (1 job @36.24) 36.24 Total Cost of Job 137.12 Req 4: Customer Margin Revenue (6 00 sq ft @ 23.45 per 100 sq. ft) 140.7 Less: Cost Cleaning 86.04 Travel 14.84 Support 36.24 Customer Margin 3.58

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.