Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the comp
Posted: Thu May 26, 2022 8:15 am
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 $22.15 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:
The total cost of operating the company for the year is $342,000
which includes the following costs:
Resource consumption is distributed across the activities as
follows:
Job support consists of receiving calls from potential customers
at the home office, scheduling jobs, billing, resolving issues, and
so on.
Required:
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 $22.15 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:
The total cost of operating the company for the year is $342,000
which includes the following costs:
Resource consumption is distributed across the activities as
follows:
Job support consists of receiving calls from potential customers
at the home office, scheduling jobs, billing, resolving issues, and
so on.
Required: