70.2K

Verified Solution

Link Copied!

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 $23.75 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, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below Activity for the Year Activity Cost Pool Clearing carpets Travel to jobs Job support Other (costs of id o capacity and organization-sustaining costs) Activity Measure Square feet cleaned (00s) Miles driven Number of jobs 15,000 hundred square feet 77,500 miles 1,900 jobs Not appicable The total cost of operating the company for the year is $370,000, which includes the following costs Cleaning supplies Cloaning oquipmant doprociation Vehicle expenses Offico exponses $141,000 31,000 16,000 33,000 66,000 Total cost 370,000 Resource consumption is distributed across the activities as folows Distribution of Resource Consumption Across Activities Travel to Jobs 11% Job Support Other 0% 19% 71% Carpets 100% 70% Clearing supplies Cleaning oquipment deprociation Vehicle expenses Offico axponsos 0% 100% 81% 60% 29% 100% 100% 0% 0% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on

Answer & Explanation Solved by verified expert

See Answer