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Accounting

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Gallatin Carpet Cleaning is a small, familyowned 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 $22.65 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: or Activity Measure Square feet cleaned (003) Miles driven Number of jobs Activity Cost Pool hundred square Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and 7,000 feet 1, 900 jobs Not applicable 147,500 miles idle capacity costs) following costs: Wages $142,000 30,000 Cleaning equipment depreciation Vehicle expenses Office expenses President' s compensation Total cost 11,000 26,000 64,000 83,000 $356,000

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