heducation.com/hm.tpx Gallatin Carpet Cleaning is a small family-owned business
ID: 2547940 • Letter: H
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heducation.com/hm.tpx 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 $23.60 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 fronm has suggested investigating this question using activity-based costing, After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below Cleaning carpets Travel to jobs Job support Other (costs of idle capacity and Square feet cleaned (00s) Miles driven Number of jobs 12,000 hundred square feet 172,500 miles 2,000 jobs organization-sustaining costs) None Not applicable The total cost of operating the company for the year is s337.000, which includes the following costs: 145,000 26,000 Cleaning equipment depreciation 800 Cleaning supplies Vehicle expenses Office expenses 28,000 57.000 73,000 Total cost $ 337.000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption Across Activities Cleaning Travel toJob Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Ofice expenses President's compensation CarpetsJobs 0% 75% 0% SupportOthr 13% 096 28% 096 25% 39% 31% 69% Total 100% 100% 100% 100% 100% 100% 72% 100% 72% 0% 0% 0% 61% Job support consists of receiving calls from potental customers at the home office, scheduling jobs, biling. resolving issues, and so on Required: 1 Prepare the first-stage allocation of costs to the activity cost pools Answer is complete and correct. Cleaning Carpets 5 104,400S 21,750s Travel to Support Other Total Wages s18,850$ 145.000 GExplanation / Answer
STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF Cleaning Travel to Job Support Other Total APPORTION IN $ IN $ IN $ IN $ IN $ Wages and salaries 72:15:0:13 104,400 21,750 0 18,850 145,000 Cleaning supplies 100:0:0:0 26,000 26,000 equipment depreciation 72:0:028 5,760 0 0 2,240 8,000 Vehiccle expense 0:75:0:25 0 21,000 0 7,000 28,000 Office expense 0:0:61:39 0 34,770 22,230 57,000 Pesident compensation 0:0:31:69 22,630 50,370 73000 TOTAL COST OF ACTIVITY 136,160 42,750 57,400 100,690 337,000 STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Cleaining 100 sq. feet 136,160 12,000 11.35 Travel miles 42,750 172,500 0.25 Support Jobs 57,400 2,000 28.70 Cost of Job Flying N-ranch: Cleaning (8 @11.35) 90.8 Travel (53 @0.25) 13.25 Support (1 order@28.70) 28.7 Cost of Job Flying N-ranch: 132.75 Req 4: CUSTOMER MARGIN : Sales revenues 188.8 Less: Cost Cleaning 90.8 Travel 13.25 Support 28.7 Total cost 132.75 CUSTOMER MARGIN : 56.05
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