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 Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Not applicable The total cost of operating the company for the year is $369,000 which includes the following costs: Activity Measure Square feet cleaned (00s) Miles driven Number of jobs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses office expenses President's compensation None Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities $ 148,000 31,000 17,000 30,000 67,000 76.000 $369,000 Cleaning Travel to Carpets 78% 100% 68% 0% 0% 0% Jobs Job Support 14% 0% 0% 79% 0% 0% ક૭ ૭ ૨ 0% 59% 33% Other 8% 0% Activity for the Year 13,500 hundred square feet 65,000 miles 1,900 jobs 32% 21% 41% 67% Total 100% 100% 100% 100% 100% 100% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. 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 600 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 $133.20 (600 square feet @ $22.20 per hundred square feet). Calculate the customer margin earned on this job.

Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 2CMA: The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the...
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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
Activity for the Year
13,500 hundred square feet
65,000 miles
1,900 jobs
Travel to jobs
Job support
Other (organization-sustaining costs and idle
capacity costs)
Not applicable
The total cost of operating the company for the year is $369,000 which includes the following costs:
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
President's compensation
Total cost
Activity Measure
Square feet cleaned (00s)
Miles driven
Number of jobs
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
President's compensation
None
$ 148,000
31,000
17,000
30,000
67,000
76,000
$ 369,000
Resource consumption is distributed across the activities as follows:
Distribution of Resource Consumption Across Activities
Cleaning
Carpets
78%
100%
68%
0%
0%
0%
Travel to
Jobs
14%
0%
79%
0%
Job Support
0%
0%
0%
0%
59%
33%
Other
8%
0%
32%
21%
41%
67%
Total
100%
100%
90%
100%
100%
100%
Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so
on.
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 600 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 $133.20 (600 square feet @ $22.20 per hundred square feet). Calculate the customer
margin earned on this job.
Transcribed Image Text: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 Activity for the Year 13,500 hundred square feet 65,000 miles 1,900 jobs Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Not applicable The total cost of operating the company for the year is $369,000 which includes the following costs: Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation Total cost Activity Measure Square feet cleaned (00s) Miles driven Number of jobs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President's compensation None $ 148,000 31,000 17,000 30,000 67,000 76,000 $ 369,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets 78% 100% 68% 0% 0% 0% Travel to Jobs 14% 0% 79% 0% Job Support 0% 0% 0% 0% 59% 33% Other 8% 0% 32% 21% 41% 67% Total 100% 100% 90% 100% 100% 100% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. 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 600 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 $133.20 (600 square feet @ $22.20 per hundred square feet). Calculate the customer margin earned on this job.
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