View the step-by-step solution to:

Can I please get some assistance with the following question (s)?

Can I please get some assistance with the following question (s)? Thanks in advance.
Complete the following exercise and respond to at least two of your fellow students' postings. 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 $28 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
Activity Measure
Activity for the Year

Cleaning carpets
Square feet cleaned (00s)
20,000 hundred



square feet

Travel to jobs
Miles driven
60,000 miles

Job support
Number of jobs
2,000 jobs

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


The total cost of operating the company for the year is $430,000, which includes the following costs:

Wages
$ 150,000

Cleaning supplies
40,000

Cleaning equipment depreciation
20,000

Vehicle expenses
80,000

Office expenses
60,000

President's compensation
80,000


$ 430,000


Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities


Cleaning
Travel to
Job




Carpets
Jobs
Support
Other
Total

Wages
70%
20%
0%
10%
100%

Cleaning supplies
100%
0%
0%
0%
100%

Cleaning equipment depreciation
80%
0%
0%
20%
100%

Vehicle expenses
0%
60%
0%
40%
100%

Office expenses
0%
0%
45%
55%
100%

President's compensation
0%
0%
40%
60%
100%


Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Using Exhibit 7-5 as a guide, prepare the first-stage allocation of costs to the activity cost pools.
Using Exhibit 7-6 as a guide, compute the activity rates for the activity cost pools.
The company recently completed a 5 hundred square foot carpet -cleaning job at the Flying N ranch--a 75-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system.
The revenue from the Flying N ranch was $140 (5 hundred square feet @ $28 per hundred square feet). Using Exhibit 7-11 as a guide, prepare a report showing the margin from this job.
What do you conclude concerning the profitability of the Flying N ranch job? Explain.
What advice would you give the president concerning pricing jobs in the future?

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question