Gallatin Carpet Cleaning is a small, family-owned business operating out of Boze

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 $23.35 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 organization-sustaining costs) Activity Measure Activity for the Year hundred square feet 14,000 Square feet cleaned (00s) Miles driven Number of jobs 184,000 miles 2,000 jobs 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 comp Total cost $142,000 33,000 15,000 37,000 60,000 77,000 $ 364,000 ensation Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities

Explanation / Answer

2.

3. Calculation of the cost of job -

4. Calcluation of Margin -

Please note all values are in $.

In case of any clarification required please comment.

Cleaning Carpets Travel to jobs Job Support other Total Wages 110760 15620 15620 142000 Cleaning supplies 33000 33000 Cleaning equipment depriciation 10950 4050 15000 vehicle expenses 29600 7400 37000 office expenses 34200 25800 60000 presidents compensation 25410 51590 77000 Total Cost 154710 45220 59610 104460 364000

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