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 $23.85 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 $347,000 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:

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 53-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 $95.40 (400 square feet @ $23.85 per hundred square feet). Calculate the customer margin earned on this job.

Complete this question by entering your answers in the tabs below.

• Required 1
• Prepare the first-stage allocation of costs to the activity cost pools

• 	Cleaning Job Carpets Travel to Jobs 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

• Required 2

• 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

• Required 3

• The company recently completed a 400 square foot carpet-cleaning job at the Flying N ranch—a 53-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

• Required 4

• The revenue from the Flying N ranch was $95.40 (4 hundred square feet @ $23.85 per hundred square feet). Calculate the customer margin earned on this job. (Round your intermediate calculations and final answers to 2 decimal places.)

  	Customer margin

Consider the following two-server one-queue system from time = 0 to time = 20 min. If both servers are available when a customer arrives, the customer will choose server1. Customers waiting in the queue enter service whenever any one of the two servers becomes available (first come, first serve). Arrivals and service times are: • Customer #1 arrives at t = 0 and requires 2 minutes of service time • Customer #2 arrives at t = 1 and requires 5 minutes of service time • Customer #3 arrives at t = 3 and requires 3 minute of service time • Customer #4 arrives at t = 12 and requires 4 minute of service time Solve for system throughput (X) (# of customers served per unit time during the simulation time), total busy time for server 1(B1), total busy time for server 2(B2), mean service time for server 1(Ts1), mean service time for server 2(Ts2), server 1 utilization (U1), server 2 utilization (U2), average delay in the queue (D), average number of customers in the queue (Q), and average number of customers in the system (L). Also, draw the graph of time vs number of customers in the system. Show your work to receive full credit.

Fantastic Styling Salon is run by three stylists, Jenny Perez, Jill Sloan, and Jerry Tiller, each capable of serving four customers per hour, on average. Use POM for Windows or OM Explorer to answer the following questions: During busy periods of the day, when nine customers on average arrive per hour, all three stylists are on staff.

a. If all customers wait in a common line for the next available stylist, how long would a customer wait in line, on average, before being served?

b. Suppose that each customer wants to be served by a specific stylist, 1/3 want Perez, 1/3 want Sloan, 1/3 want Tiller. How long would a customer wait in line, on average, before being served? During less busy periods of the day, when six customers on average arrive per hour, only Perez and Sloan are on staff.

c. If all customers wait in a common line for the next available stylist, how long would a customer wait in line, on average, before being served?

d. Suppose that each customer wants to be served by a specific stylist, 60 percent want Perez and 40 percent want Sloan. How long would a customer wait in line, on average, before being served by Perez? By Sloan? Overall?

The management of Mitchell Labs decided to go private in 2002 by buying all 2.90 million of its outstanding shares at $24.20 per share. By 2006, management had restructured the company by selling off the petroleum research division for $10.50 million, the fiber technology division for $9.20 million, and the synthetic products division for $19 million. Because these divisions had been only marginally profitable, Mitchell Labs is a stronger company after the restructuring. Mitchell is now able to concentrate exclusively on contract research and will generate earnings per share of $1.30 this year. Investment bankers have contacted the firm and indicated that if it reentered the public market, the 2.90 million shares it purchased to go private could now be reissued to the public at a P/E ratio of 14 times earnings per share.

a. What was the initial cost to Mitchell Labs to go private?

b. What is the total value to the company from (1) the proceeds of the divisions that were sold, as well as (2) the current value of the 2.90 million shares (based on current earnings and an anticipated P/E of 14)?

c. What is the percentage return to the management of Mitchell Labs from the restructuring? Use answers from parts a and b to determine this value.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,150 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $54,900 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,200 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,200 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.30 per direct labor-hour. During August, the company incurred $43,920 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,395 hours of direct labor time were needed to make 19,100 units of the Jogging Mate. The direct labor cost totaled $58,249 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,100 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,100 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.30 per direct labor-hour. During August, the company incurred $45,096 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,430 hours of direct labor time were needed to make 19,600 units of the Jogging Mate. The direct labor cost totaled $56,580 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,600 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,600 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.30 per direct labor-hour. During August, the company incurred $47,150 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,570 hours of direct labor time were needed to make 19,800 units of the Jogging Mate. The direct labor cost totaled $53,592 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,800 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,800 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.10 per direct labor-hour. During August, the company incurred $45,936 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows: Standard Hours Standard Rate per Hour Standard Cost 27 minutes $6.20 $2.79 During August, 9,300 hours of direct labor time were needed to make 19,200 units of the Jogging Mate. The direct labor cost totaled $55,800 for the month. Required: 1. What is the standard labor-hours allowed (SH) to makes 19,200 Jogging Mates? 2. What is the standard labor cost allowed (SH × SR) to make 19,200 Jogging Mates? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? 5. The budgeted variable manufacturing overhead rate is $4.70 per direct labor-hour. During August, the company incurred $48,360 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.

Erie Company manufactures a mobile fitness device called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate are as follows:

During August, 9,585 hours of direct labor time were needed to make 19,700 units of the Jogging Mate. The direct labor cost totaled $52,718 for the month.

Required:

1. What is the standard labor-hours allowed (SH) to makes 19,700 Jogging Mates?

2. What is the standard labor cost allowed (SH × SR) to make 19,700 Jogging Mates?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

5. The budgeted variable manufacturing overhead rate is $4.10 per direct labor-hour. During August, the company incurred $46,008 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month.