Gallatin carpet cleaning is a small family

Assignment Help Financial Accounting

Reference no: EM13954595

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 $23.80 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)	10,500	hundred square feet
Travel to jobs	Miles driven	325,500	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 $365,000, which includes the following costs:


Wages	$	148,000
Cleaning supplies		21,000
Cleaning equipment depreciation		12,000
Vehicle expenses		40,000
Office expenses		69,000
President's compensation		75,000

Total cost	$	365,000

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption Across Activities

	Cleaning Carpets		Travel to Jobs		Job Support		Other		Total
Wages	77	%	16	%	0	%	7	%	100	%
Cleaning supplies	100	%	0	%	0	%	0	%	100	%
Cleaning equipment depreciation	70	%	0	%	0	%	30	%	100	%
Vehicle expenses	0	%	79	%	0	%	21	%	100	%
Office expenses	0	%	0	%	58	%	42	%	100	%
President's compensation	0	%	0	%	27	%	73	%	100	%
1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. The company recently completed a 4 hundred square foot carpet-cleaning job at the Flying N ranch-a 58.00-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system

Reference no: EM13954595

Questions Cloud

Department of a multi step process : the cost of a product located in the final production department of a multi step process

Possible solution to the perceived problem : Discuss the validity of this criticism and suggest a possible solution to the perceived problem.

Determine the probability that both marbles are red. : A club with eight members from Grade 11 and five members from Grade 12 is electing a president, vice-president and secretary. What is the probability (as a percentage to one decimal place) that Grade 12 students will be elected for all three posit..

Discuss the effects of categorization and social influences : Discuss the effects of categorization and social influences on decision making - how categorization specifically influences individual decision making.

Gallatin carpet cleaning is a small family : 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.

Differences between the us and chinese/korean companies : What are the major similarities and major differences between the US and Chinese/Korean companies or organizations in terms of the strategy, management practices or implementation based on the seminars you attended, company/organization visits and yo..

What is the time required for its potential to be raised : A radioactive source in the form of a metallic sphere of radius 10^-2 m emits beta particles at the rate of 10^10 particles per second. The source is electrically insulated. What is the time required for its potential to be raised by 4 V assuming ..

Difference principle of rawls theory states : Which of the following statements is NOT a criticism of libertarianism?

Create an rmi service for addition and factorial : Create an RMI service for "addition" and "factorial". The service will define two remote functions - add() and factorial(). The add() function will take two integers as parameters and return the addition of these numbers.

User Account

All Pages