Question

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 $22.05 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 Cost Pool Cleaning carpets Travel to jobs Job support Other (costs of idle capacity and organization-sustaining costs) Activity Measure Square feet cleaned (O0s) Miles driven Number of jobs Activity for the Year 12,000 hundred square feet 46,500 miles 1,800 jobs None Not applicable The total cost of operating the company for the year is $335,000, which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost $135,000 24,000 12.000 30,000 58,000 76,000 $335,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Wages 74% 13% 0% Cleaning supplies 100% 0% Cleaning equipment depreciation 69% 0% 0% Vehicle expenses 0% 82% 0% Office expenses 0% 64% President's compensation 0% 25% Other 13% 0% 31% 0% Total 100% 100% 100% 100% 100% 100% 18% 0% 36% 0% 75% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. value: 10.00 points Required information Requirement 1: Prepare the first stage allocation of costs to the activity cost pools. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "S" sign in your response.) Distribution of Resource Consumption Across Activity Cost Pools Cleaning Carpets Travel to Jobs Job Support Other Total Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total

Answer 1

First stage allocation of activity cost pools

Particulars	Cleaning Carpets	Travel to Job	Job Support	Others	Total
Wages	99900	17550	0	17550	135000
Cleaning Supplies	24000	0	0	0	24000
Cleaning Equipment Depreciation	8280	0	0	3720	12000
Vehicle Expenses	0	24600	0	5400	30000
Office Expenses	0	0	37120	20880	58000
President's Compensation	0	0	19000	57000	76000
Total	132180	42150	56120	104550	335000

Second stage allocation

Particulars	Cleaning Carpets	Travel to Job	Job Support	Others	Total
Total Allocable costs	132180	42150	56120	104550	335000
Units of cost driver used	12000 hundred sq.ft	46500 miles	1800	NA
Rate / unit of cost driver used	11.015 per hundred sq.foot	0.9064 per mile	31.18 per job