Gallatin Carpet Cleaning is a small, family-owned business operating out of Boze
ID: 2562893 • 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 $23.55 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: Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (costs of idle capacity and Activity Measure Activity for the Year 8,500 hundred square feet Square feet cleaned (00s) Miles driven Number of jobs 317,000 miles 1,800 jobs organization-sustaining costs) None Not applicable The total cost of operating the company for the year is $364,000, which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 138,000 30,000 17,000 29,000 65,000 85,000 Total cost $ 364,000Explanation / Answer
1.
Wages
$97,980
(138000×71%)
$15,180
(138000×11%)
0
$24,840
(138000×18%)
$138,000
$12,410
(17000×73%)
$4590
(17000×27%)
2.
3.
Job cost - Flying N ranch:
4.
Product margin:
Cleaning carpets Travel to jobs job support other TotalsWages
$97,980
(138000×71%)
$15,180
(138000×11%)
0
$24,840
(138000×18%)
$138,000
Cleaning supplies $30,000(100%) 0 0 0 $30,000 Cleaning equipment depreciation$12,410
(17000×73%)
0 0$4590
(17000×27%)
$17,000 Vehicle expense 0 $22,910(79%) 0 $6090(21%) $29,000 Office expense 0 0 $39,000(60%) $26,000(40%) $65,000 President compensation 0 0 $24,650(29%) $60,350(71%) $85,000 Total cost $140,390 $38,090 $63,650 $121,870 $364,000Related Questions
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