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 $2225 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, she designed a simple system conslIsting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (00s) Activity for the Year -13,500 hundred square feet Miles driven 300,000 miles Number of jobs 1,700 jobs None Not applicable The total cost of operating the company for the year is $347,000 which Includes the following costs: Wages Cleaning supplies cleaning equipment depreciation Vehicle expenses 144,000 32,000 8,e00 26, 000 56, eee Office expenses President's compensation 81, e0e Total cost 347,00e Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs Job Support Other Total Carpets 78% wages Cleaning supplies cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 1ees 100% 1e0% 11% 11% 100% es 0% 30% 81% u* e% 19% 100% 36% 67% 64% 33% 100x Job support consists of recerving calls from potential customers at the home office, scheduling jobs. billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2 Compute the activity rates for the activity cost pools. 3 The company recently completed a 200 square foot carpet-cieaning Job at tihe Flying N Ranch-a 55-mile round-trip journey from the comni ROTemar
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 $2225 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, she designed a simple system conslIsting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (00s) Activity for the Year -13,500 hundred square feet Miles driven 300,000 miles Number of jobs 1,700 jobs None Not applicable The total cost of operating the company for the year is $347,000 which Includes the following costs: Wages Cleaning supplies cleaning equipment depreciation Vehicle expenses 144,000 32,000 8,e00 26, 000 56, eee Office expenses President's compensation 81, e0e Total cost 347,00e Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs Job Support Other Total Carpets 78% wages Cleaning supplies cleaning equipment depreciation Vehicle expenses Office expenses President's compensation 1ees 100% 1e0% 11% 11% 100% es 0% 30% 81% u* e% 19% 100% 36% 67% 64% 33% 100x Job support consists of recerving calls from potential customers at the home office, scheduling jobs. billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2 Compute the activity rates for the activity cost pools. 3 The company recently completed a 200 square foot carpet-cieaning Job at tihe Flying N Ranch-a 55-mile round-trip journey from the comni ROTemar
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 89TA
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