ow/connect.html mework Che Gallatin Carpet Cleaning is a small, family-owned bus
ID: 2540832 • Letter: O
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ow/connect.html mework Che 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 $23.20 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 owners 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 tivity Cost Pool Travel to jobs other (orgenization-sustaining costs and idleor es Miles driven 159,500 miles 1,900 jobs capacity costs) Not applicable The total cost of operating the company for the year is $369,000 which includes the following costs 35,000 11,000 39,000 60,000 82,000 Cleaning supplies Cleaning equipment depreciation Prey 12 of 13111 Next>Explanation / Answer
Req 1: STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF Cleaning Travel to Job Job Support Others Total APPORTION IN $ IN $ IN $ IN $ IN $ Wages 71:14:0:15 100,820 19,880 0 21,300 142,000 Cleaning Supplies 100:0:0:0 35,000 0 0 0 35,000 Depreciation 73:0:0:27 8,030 0 0 2,970 11,000 Vehicle expense 0:80;0:20 0 31,200 0 7,800 39,000 Office expense 0:0:59:41 0 0 35,400 24,600 60,000 Preseident salary 0:0:28:72 0 0 22,960 59,040 82000 TOTAL COST OF ACTIVITY 143,850 51,080 58,360 115,710 369,000 Req 2: STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Cleaning Sq. ft 143,850 13,000 11.07 pre 100 sq. ft Travel to Job Miles 51,080 159,500 0.32 per Miles Job Ssupprot Jobs 58,360 1,900 30.72 per job Req 3: Cost of Flying Ranch-Job Cleaning (2 hunder sq. ft @ $11.07 per 100 sq. ft) 22.14 Travel to JOB (114 miles @$0.32) 36.48 Job Support (1 Job @$30.2) 30.72 Total cost of Job Flying N ranch 89.34 Req 4: Revenue of Job (23.20 per 100 sq. ft) 46.4 Less: Ttotal cost assigned 89.34 Net Customer margin -42.94
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