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 $23.10 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 Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (05) Miles driven Number of jobs Activity for the Year 12,000 hundred square feet 129,000 miles 1,900 jobs None Not applicable The total cost of operating the company for the year is $342,000 which includes the following costs: $ Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost 141,000 26,000 12,000 29,000 63,000 71,000 342,000 $

Answer 1

Solution 1:

G H I к 4 Gallatin Carpet First stage allocation of cost to activity cost pools Cleaning Carpets Travel to Jobs Job Support Others Total Cost % % % Amount Amount $21,150 78% 100% Amount $109,980 $ 26,000 $8,880 $0 $0 Particulars 8 9 Wages 10 Cleaning Supplies 11 Cleaning Equipment depreciation 12 Vehicle Expenses 13 Office Expense 14 President's Compensation 15 16 Total 17 74% 15% 0% 0% 77% 0% 0% 0% 0% 0% 0% 57% 27% 7% 0% 26% 23% 43% 73% Amount $9,870 $0 $3,120 $6,670 $27,090 $51,830 $141,000 $26,000 $12,000 $29,000 $63,000 $71,000 0% 0% 0% $22,330 $0 $0 $35,910 $19,170 $0 $0 $144,860 $43,480 $55,080 $98,580 $342,000 18 19 20 21 22 24 25 26 27 28 29 30 et562 Sheet530 Sheet223 (2) Sheet544 Sheet48 (7) Sheet782 (3) Sheet558 Sheet546 III 0 <

Solution 2:

W 11 12 13 Activity Cleaning Carpets Travel to Jobs Job Support Other Determination of activity rate for each activity Estimated Overhead Cost Activity Base Usage of Activity Base Activity Rate $144,860.00 Square feet cleaned 12000 $12.07 $43,480.00 Miles driven 129000 $0.34 $55,080.00 Nos of jobs 1900 $28.99 $98,580.00 No allocation 14 15 16 Total $342,000.00 17 19 20 31 33 34 35 36 37 38 39 40 42 43 44 46 48 49 50 51 52 et562 ) Sheet530 Sheet223 (2) Sheet544 Sheet48 (7)

Solution 3:

- AA AB АС Computation of Job Cost Particulars Amount Cleaning Carpet (6*$12.07) $72.42 Travel to Jobs (53*$0.34) $18.02 Job Support $28.99 12 Total Cost $119.43 14 15 16 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 alisez et562 ) proceso Sheet530 se Sheet223 (2) rves greuse Sheet544 Contacte Sheet48 (7)

Solution 4:

AE AF | AG AK Amount $138.60 11 Customer Margin - Activity based costing Particulars Revenue Costs: Cleaning Carpet $72.42 Travel to Jobs $18.02 Job Support $28.99 Total Cost 12 13 14 15 $119.43 17 Customer Margin $19.17 19 20 21 22 23 24 25 27 28 29 30 31 32 33 34 35 36 37 38 39 40 et562 ) Sheet530 Sheet223 (2) Sheet544 Sheet48 (7)