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 Activity Measure Square feet cleaned (ees) Miles driven Activity for the Year 13,80e hundred square feet 31e,see miles 1,8ee jobs Number of 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 following costs: wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses 148, 00e 25,eee 17,eee 38, eee 59,eee 85, e0e $ 372, eee President's compensation Total cost Resource consumption is distributed across the activitles as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total 77% 1eex 1e% ex 13% 1eex Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses ex ex ex 1eex 73% ex ex 27% 1eex ex 75% ex 25% 1eex ex ex 56% 30% 44% 1eex President's compensation ex ex 7e% 1eex on. Job support consists of recelving calls from potentlal customers at the home office, scheduling jobs, billing, resolving issues, and so 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.

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 Activity Measure Square feet cleaned (ees) Miles driven Activity for the Year 13,80e hundred square feet 31e,see miles 1,8ee jobs Number of 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 following costs: wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses 148, 00e 25,eee 17,eee 38, eee 59,eee 85, e0e $ 372, eee President's compensation Total cost Resource consumption is distributed across the activitles as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total 77% 1eex 1e% ex 13% 1eex Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses ex ex ex 1eex 73% ex ex 27% 1eex ex 75% ex 25% 1eex ex ex 56% 30% 44% 1eex President's compensation ex ex 7e% 1eex on. Job support consists of recelving calls from potentlal customers at the home office, scheduling jobs, billing, resolving issues, and so 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

See similar textbooks