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 $22.05 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 requlre 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 for the Year 14,0ee hundred square feet 402, see miles Activity Cost Pool Cleaning carpets Travel to jobs Job support other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (ees) Miles driven Number of jobs 2,000 jobs None Not applicable The total cost of operating the company for the year is $362,000 which Includes the following costs: $ 143,eee wages cleaning supplies 34, e00 Cleaning equipment depreciation Vehicle expenses Office expenses 14,eee 28, eee 58,eee President's compensation 85, eee Total cost 362, e00 Resource consumptilon is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs Job Support Other es Carpets Total 75% 1eex 1eex 1eex 1e% 15% wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses ex ex es 72% ex ex 28% 1eex ex 84% ex 16% 41% 1eex 59% Office expenses President's compensation ex ex 1eex ex ex 7ex 1eex Job support consists of receving 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 800 square foot carpet-cleaning Job at the Flying N Ranch-a 56-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 $176.40 (800 square feet e $22.05 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 $22.05 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 requlre 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 for the Year 14,0ee hundred square feet 402, see miles Activity Cost Pool Cleaning carpets Travel to jobs Job support other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (ees) Miles driven Number of jobs 2,000 jobs None Not applicable The total cost of operating the company for the year is $362,000 which Includes the following costs: $ 143,eee wages cleaning supplies 34, e00 Cleaning equipment depreciation Vehicle expenses Office expenses 14,eee 28, eee 58,eee President's compensation 85, eee Total cost 362, e00 Resource consumptilon is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Travel to Jobs Job Support Other es Carpets Total 75% 1eex 1eex 1eex 1e% 15% wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses ex ex es 72% ex ex 28% 1eex ex 84% ex 16% 41% 1eex 59% Office expenses President's compensation ex ex 1eex ex ex 7ex 1eex Job support consists of receving 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 800 square foot carpet-cleaning Job at the Flying N Ranch-a 56-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 $176.40 (800 square feet e $22.05 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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