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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 $$22\mathrm{.}75$ per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers$$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, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below:

Activity Cost Pool Activity Measure Activity for the Year

Cleaning carpets Square feet cleaned $(00$s$)8,500$ hundred square feet

Travel to jobs Miles driven $404,500$ miles

Job support Number of jobs $2,000$ jobs

Other $($organization$-$sustaining costs and idle capacity costs$)$ None Not applicable

The total cost of operating the company for the year is $$358,000$ which includes the following costs:

Wages $ $150,000$

Cleaning supplies $33,000$

Cleaning equipment depreciation $7,000$

Vehicle expenses $26,000$

Office expenses $67,000$

President$$s compensation $75,000$

Total cost $ $358,000$

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities

Cleaning Carpets Travel to Jobs Job Support Other Total

Wages $77\%13\%0\%10\%100\%$

Cleaning supplies $100\%0\%0\%0\%100\%$

Cleaning equipment depreciation $66\%0\%0\%34\%100\%$

Vehicle expenses $0\%82\%0\%18\%100\%$

Office expenses $0\%0\%59\%41\%100\%$

President$$s compensation $0\%0\%34\%66\%100\%$

Job support consists of receiving 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 $400$ square foot carpet$-$cleaning job at the Flying N Ranch$$a $58-$mile round$-$trip journey from the company$$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 $$91\mathrm{.}00(400$ square feet @ $$22\mathrm{.}75$ per hundred square feet$).$ Calculate the customer margin earned on this job.

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