**Activity-Based Costing Exercise****Step 1: Allocation of Costs to Activity Cost Pools**Prepare the first-stage allocation of costs to the activity cost pools:| | Cleaning Carpets | Travel to Jobs | Job Support | Other | Total ||---------------------|------------------|----------------|-------------|-------|-------|| Wages | | | | | $0 || Cleaning supplies | | | | | 0 || Cleaning equipment depreciation | | | | | 0 || Vehicle expenses | | | | | 0 || Office expenses | | | | | 0 || President’s compensation | | | | | 0 || **Total Cost** | $0 | $0 | $0 | $0 | $0 |**Step 2: Computation of Activity Rates**Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)| Activity Cost Pool | Activity Rate ||----------------------|------------------------------|| Cleaning carpets | _______ per hundred square feet || Travel to jobs | _______ per mile || Job support | _______ per job |**Step 3: Job Cost Calculation**The company recently completed a 400 square foot carpet-cleaning job at the Flying N Ranch—a 56-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.)| **Cost of the Job** | ____________________________ |**Step 4: Customer Margin Calculation**The revenue from the Flying N Ranch was $93.80 (4 hundred square feet @ $23.45 per hundred square feet). Calculate the customer margin earned on this job. (Negative customer margins should be indicated with a minus sign. Round your intermediate calculations and final answers to 2 decimal places.)| **Customer Margin** | ______________________________ |---This exercise guides students through the process of activity-based costing by focusing on assigning costs to specific activities, determining activity rates, computing job costs, and assessing customer margins. Gallatin Carpet Cleaning is a small, family-owned business based in Bozeman, Montana. The company traditionally charges a fee of $23.45 per hundred square feet of carpet cleaned. Some questions have arisen about the profitability of certain jobs, especially those on remote ranches that require extensive travel. The owner's daughter, using activity-based costing, designed a system comprising four activity cost pools with corresponding measures:### Activity Cost Pools and Measures| 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 | 389,000 miles || Job support | Number of jobs | 2,000 jobs || Other (Organization-sustaining costs and idle capacity costs) | None | Not applicable |### Total Operating Costs for the Year:The annual cost of operating the company is $364,000, broken down as follows:- Wages: $149,000- Cleaning supplies: $30,000- Cleaning equipment depreciation: $6,000- Vehicle expenses: $78,000- Office expenses: $68,000- President's compensation: $33,000- **Total cost**: $364,000### Distribution of Resource Consumption Across Activities:The table below displays how resources are distributed across different activities:| | Cleaning Carpets | Travel to Jobs | Job Support | Other | Total ||----------------------------------|----------------|----------------|------------|------|------|| **Wages** | 75% | 5% | 11% | 9% | 100% || **Cleaning supplies** | 100% | 0% | 0% | 0% | 100% || **Cleaning equipment depreciation** | 100% | 0% | 0% | 0% | 100% || **Vehicle expenses** | 0% | 75% | 25% | 0% | 100% || **Office expenses** | 6% | 0% | 50% | 44% | 100% || **President's compensation** | 0% |

Required: 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 400 square foot carpet-cleaning job at the Flying N Ranch-a 56-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $93.80 (400 square feet e $23.45 per hundred square feet). Calculate the customer margin earned on this job.

Required: 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 400 square foot carpet-cleaning job at the Flying N Ranch-a 56-mile round-trip journey from the company's offices in Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $93.80 (400 square feet e $23.45 per hundred square feet). Calculate the customer margin earned on this job.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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