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Gallatin Carpet Cleaning is a small, family-owned businessoperating out of Bozeman, Montana. For its services, the companyhas always charged a flat fee per hundred square feet of carpetcleaned. The current fee is $22.75 per hundred square feet.However, there is some question about whether the company isactually making any money on jobs for some customers—particularlythose located on remote ranches that require considerable traveltime. The owner’s daughter, home for the summer from college, hassuggested investigating this question using activity-based costing.After some discussion, she designed a simple system consisting offour activity cost pools. The activity cost pools and theiractivity measures appear below:  

Activity Cost Pool	Activity Measure	Activity for the Year
Cleaning carpets	Square feet cleaned (00s)	12,500	hundred square feet
Travel to jobs	Miles driven	182,500	miles
Job support	Number of jobs	2,000	jobs
Other (organization-sustaining costs and idle capacitycosts)	None	Not applicable

The total cost of operating the company for the year is $333,000which includes the following costs:  

Wages	$	147,000
Cleaning supplies		22,000
Cleaning equipment depreciation		6,000
Vehicle expenses		27,000
Office expenses		60,000
President’s compensation		71,000
Total cost	$	333,000

Resource consumption is distributed across the activities asfollows:

Distribution of Resource Consumption Across Activities
	Cleaning Carpets		Travel to Jobs		Job Support		Other		Total
Wages	77	%	11	%	0	%	12	%	100	%
Cleaning supplies	100	%	0	%	0	%	0	%	100	%
Cleaning equipment depreciation	72	%	0	%	0	%	28	%	100	%
Vehicle expenses	0	%	78	%	0	%	22	%	100	%
Office expenses	0	%	0	%	63	%	37	%	100	%
President’s compensation	0	%	0	%	34	%	66	%	100	%

Job support consists of receiving calls from potential customersat the home office, scheduling jobs, billing, resolving issues, andso on.

Required:

1. Prepare the first-stage allocation of costs to the activitycost pools.

2. Compute the activity rates for the activity cost pools.

3. The company recently completed a 600 square footcarpet-cleaning job at the Flying N Ranch—a 59-mile round-tripjourney from the company’s offices in Bozeman. Compute the cost ofthis job using the activity-based costing system.

4. The revenue from the Flying N Ranch was $136.50 (600 squarefeet @ $22.75 per hundred square feet). Calculate the customermargin earned on this job.