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 $23.00 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 consisting 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 for the Year 13,80e hundred square feet 31e,see miles 1,8ee jobs Activity Measure Square feet cleaned (ees) Miles driven Number of jobs None Not applicable The total cost of operating the company for the year is $372,000 which includes the following costs: $ 148,eee 25,eee 17,e0e 38,eee 59,e0e 85, eee Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $ 372, eee Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Caгpets Travel Total 1eex to Jobs Job Support other ex 77% 1e% 13% Wages Cleaning supplies Cleaning equipment depreciation 1eex ex ex ex 1eex ex 73% ex 27% 1eex Vehicle expenses Office expenses 75% ex 25% 1eex 1eex 1eex ex ex 56% 44% President's compensation ex ex 3ex 7e% Job support consists of receiving calls from potentlal 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 800 square foot carpet-cleaning job at the Flying N Ranch-a 55-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this Job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $184.00 (800 square feet @ $23.00 per hundred square feet). Calculate the customer margin earned on this job.

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 89TA
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Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Required 4
The company recently completed a 800 square foot carpet-cleaning job at the Flying N Ranch-a 55-mile round-trip journey
from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your
intermediate calculations and final answer to 2 decimal places.)
Cost of the job
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 The company recently completed a 800 square foot carpet-cleaning job at the Flying N Ranch-a 55-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.) Cost of the job
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 $23.00 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 consisting of
four activity cost pools. The activity cost pools and their activity measures appear below:
Activity Measure
Square feet cleaned (80s)
Activity Cost Pool
Cleaning carpets
Travel to jobs
Job support
Activity for the Year
13,000 hundred square feet
Miles driven
310,50e miles
Number of jobs
1,800 jobs
Other (organization-sustaining costs and idle
capacity costs)
None
Not applicable
The total cost of operating the company for the year is $372,000 which Includes the
148,000
25,000
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
17,000
38, e0e
59,000
Office expenses
President's compensation
85, 000
Total cost
372,000
Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Cleaning
Carpets
Travel
to Jobs
Job Support Other
Total
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
77%
1e%
e%
13%
100%
100%
ex
e%
100%
73%
e%
ex
27%
100%
e%
75%
ex
25%
1eex
e%
e%
56%
44%
1eex
President's compensation
ex
30%
78%
100%
Job support consists of recelving calls from potentlal customers at the home office, scheduling Jobs, billing, resolving Issues, and so
on.
Requlred:
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 800 square foot carpet-cleaning job at the Flying N Ranch-a 55-mle round-trip journey from
the company's offices In Bozeman. Compute the cost of this job using the activity-based costing system.
4. The revenue from the Flying N Ranch was $184.00 (800 square feet @ $23.00 per hundred square feet). Calculate the customer
margin earned on this job.
Complete this question by entering your answers in the tabs below.
Transcribed Image Text: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 $23.00 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 consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Measure Square feet cleaned (80s) Activity Cost Pool Cleaning carpets Travel to jobs Job support Activity for the Year 13,000 hundred square feet Miles driven 310,50e miles Number of jobs 1,800 jobs Other (organization-sustaining costs and idle capacity costs) None Not applicable The total cost of operating the company for the year is $372,000 which Includes the 148,000 25,000 Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses 17,000 38, e0e 59,000 Office expenses President's compensation 85, 000 Total cost 372,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses 77% 1e% e% 13% 100% 100% ex e% 100% 73% e% ex 27% 100% e% 75% ex 25% 1eex e% e% 56% 44% 1eex President's compensation ex 30% 78% 100% Job support consists of recelving calls from potentlal customers at the home office, scheduling Jobs, billing, resolving Issues, and so on. Requlred: 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 800 square foot carpet-cleaning job at the Flying N Ranch-a 55-mle round-trip journey from the company's offices In Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $184.00 (800 square feet @ $23.00 per hundred square feet). Calculate the customer margin earned on this job. Complete this question by entering your answers in the tabs below.
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