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 $22.75 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 $349,000 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 600 square foot carpet-cleaning job at the Flying N Ranch—a 54-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 $136.50 (600 square feet @ $22.75 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.

Required 2

Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

• Required 3

The company recently completed a 600 square foot carpet-cleaning job at the Flying N Ranch—a 54-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.)

Required 4

The revenue from the Flying N Ranch was $136.50 (6 hundred square feet @ $22.75 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.)

Better Blooms is a florist shop which takes orders by internet and phone, prepares the desired floral arrangements, and delivers within a 25-mile radius of the shop. Since the profit margin on the business is small for each arrangement and the competition from other florists in the area is high, the owner is concerned about setting the appropriate costs for each delivery to be profitable while still being competitive. To investigate, the owner has gathered information on a random sample of 50 recent orders and has asked you to analyze the data using statistical methods and to report to her your findings. Factors thought to be related to the cost of delivering a floral arrangement are thought to be: (1) Preparation Time – the time in minutes between when the customer has placed an order and when it is ready for delivery; more expensive arrangements take longer to prepare, (2) Delivery Time – the travel time in minutes from the shop to the recipient of the arrangement, and (3) Mileage – the distance in miles from the shop to the customer (mileage and delivery time are sometimes inversely proportional when the delivery truck can use an interstate instead of traveling through heavy downtown traffic, for instance). Develop a multiple linear regression equation that describes the relationship between the cost of delivery and the other variables. Do these three variables explain a reasonable amount of the variation in the dependent variable? Estimate the delivery cost for an arrangement that takes 20 minutes for preparation, takes 30 minutes to deliver, and must cover a distance of 12 miles. Test to determine that at least one regression coefficient differs from zero. Also test to see whether any of the variables can be dropped, rerun the regression equation until only significant variables are included. Write management report interpreting the final regression equation, show your analysis in charts, tables, graphs so it is easy for the owner to see the analysis and conclusions, and back up your charts with detailed analysis using formulas and explanations of your statistical analysis steps. The owner wants to know your report is credible, but is not a statistician, so make your explanations clear.

Cost   Prep   Delivery   Distance
22.60   20   51   20
23.37   11   33   12
31.49   16   47   19
19.31   22   18   8
28.35   18   88   17
22.63   19   20   11
22.63   29   39   11
11.53   10   23   10
21.16   13   20   8
11.53   20   32   10
28.17   15   35   16
20.42   18   23   9
21.53   19   21   10
27.55   17   37   16
23.37   19   25   12
17.10   15   15   6
27.06   13   34   15
15.99   18   13   4
17.96   12   12   4
25.22   16   41   14
24.29   13   28   13
22.76   24   26   10
28.17   19   54   16
19.68   17   18   8
25.15   16   50   13
20.36   19   19   7
21.16   13   19   8
15.22   10   45   14
18.76   12   12   5
18.76   18   16   5
24.29   17   35   13
19.56   12   12   6
22.63   18   30   11
21.16   15   13   8
21.16   11   20   8
19.68   15   19   8
18.76   17   14   7
17.96   15   11   4
23.37   10   25   12
25.22   16   32   14
27.06   18   44   16
21.96   19   28   9
22.63   18   31   11
19.68   17   19   8
22.76   18   28   10
21.96   13   18   9
26.95   10   32   14
26.14   18   44   15
24.29   20   34   13
24.35   16   33   12

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 $22.05 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 $345,000 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 200 square foot carpet-cleaning job at the Flying N Ranch—a 60-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 $44.10 (200 square feet @ $22.05 per hundred square feet). Calculate the customer margin earned on this job.

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

Prepare the first-stage allocation of costs to the activity cost pools.

Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

The company recently completed a 200 square foot carpet-cleaning job at the Flying N Ranch—a 60-mile round-trip journey from the company’s offices in Bozeman. Comp

ute the cost of this job using the activity-based costing system. (Round your intermediate calculations and final answer to 2 decimal places.)

The revenue from the Flying N Ranch was $44.10 (2 hundred square feet @ $22.05 per hundred square feet). Calculate the customer margin earned on this job. (Round your intermediate calculations and final answers to 2 decimal places.)

Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD). Shauna wanted to determine her taxable income for this year. She correctly calculated her AGI. However, she wasn’t sure how to compute the rest of her taxable income. She provided the following information with hopes that you could use it to determine her taxable income.

Shauna paid $4,680 for medical expenses for care from a broken ankle. Also, Shauna’s boyfriend, Blake, drove Shauna (in her car) a total of 115 miles to the doctor’s office so she could receive care for her broken ankle.

Shauna paid a total of $3,400 in health insurance premiums during the year (not through an exchange). SD did not reimburse any of this expense. Besides the health insurance premiums and the medical expenses for her broken ankle, Shauna had Lasik eye surgery last year and she paid $3,000 for the surgery (she received no insurance reimbursement). She also incurred $450 of other medical expenses for the year.

SD withheld $1,800 of state income tax, $7,495 of Social Security tax, and $14,500 of federal income tax from Shauna’s paychecks throughout the year.

In 2016, Shauna was due a refund of $250 for overpaying her 2015 state taxes. On her 2015 state tax return that she filed in April of 2016, she applied the overpayment towards her 2016 state tax liability. She estimated that her state tax liability for 2016 will be $2,300.

Shauna paid $3,200 of property taxes on her personal residence. She also paid $500 to the developer of her subdivision, because he had to replace the sidewalk in certain areas of the subdivision.

Shauna paid a $200 property tax based on the state’s estimate of the value of her car.

Shauna has a home mortgage loan in the amount of $220,000 that she secured when she purchased the home. The home is worth about $400,000. Shauna paid interest of $12,300 in interest on the loan this year.

Shauna made several charitable contributions throughout the year. She contributed stock in ZYX Corp. to the Red Cross. On the date of the contribution, the FMV of the donated shares was $1,000 and her basis in the shares was $400. Shauna originally bought the ZYX Corp. stock in 2008. Shauna also contributed $300 cash to State University and religious artifacts she has held for several years to her church. The artifacts were valued at $500 and Shauna’s basis in the items was $300. Shauna had every reason to believe the church would keep them on display indefinitely. Shauna also drove 200 miles doing church-related errands for her minister. Finally, Shauna contributed $1,200 of services to her church last year.

Shauna’s car was totaled in a wreck in January. The car was worth $14,000 and her cost basis in the car was $16,000. The car was a complete loss. Shauna received $2,000 in insurance reimbursements for the loss.

Shauna paid $300 for architectural design publications, $100 for continuing education courses to keep her up to date on the latest design technology, and $200 for professional dues to maintain her status in a professional designer’s organization.

Shauna paid $250 in investment advisory fees and another $150 to have her tax return prepared (that is, she paid $150 in 2016 to have her 2015 tax return prepared).

Shauna is involved in horse racing as a hobby. During the year, she won $2,500 in prize money and incurred $10,000 in expenses. She has never had a profitable year with her horse racing activities, so she acknowledges that this is a hobby for federal income tax purposes.

Shauna sustained $2,000 in gambling losses over the year (mostly horse-racing bets) and only had $200 in winnings.

Assuming her AGI is $107,000

a. Determine Shauna’s taxable income and complete Form 1040 and Schedule A assuming her AGI is $107,000

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 $23.95 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 $348,000 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 800 square foot carpet-cleaning job at the Flying N ranch—a 54-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 $191.60 (800 square feet @ $23.95 per hundred square feet). Calculate the customer margin earned on this job.

req 1

Prepare the first-stage allocation of costs to the activity cost pools.

req 2

Prepare the first-stage allocation of costs to the activity cost pools.

req 3

The company recently completed a 800 square foot carpet-cleaning job at the Flying N ranch—a 54-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.)

req 4

The revenue from the Flying N ranch was $191.60 (8 hundred square feet @ $23.95 per hundred square feet). Calculate the customer margin earned on this job. (Round your intermediate calculations and final answers to 2 decimal places.)

Rebecca and Walter Bunge have been married for 5 years. They live at 883 Scrub Brush Street, Apt. 52B, Las Vegas, NV 89125. Rebecca is a homemaker and Walt is a high school teacher. Rebecca's Social Security number is 222-43-7690 and Walt's is 700-01-0002. Walt's earnings from teaching are:

The Bunges incurred the following expenses during their move from Maine to Nevada in January of 2016:

The school district reimbursed Walter $500 for moving expenses. These are reflected on his W-2. Walter’s previous job, as a high school teacher in Maine, was only 5 miles from his home. Rebecca was unemployed prior to the move.

The Bunges own a ski condo located at 123 Buncombe Lane, Brian Head, UT 84719. The condo was rented for 185 days during 2016 and used by the Bunges for 15 days. Pertinent information about the condo rental is as follows:

The above amounts do not reflect any allocation between rental and personal use of the condo. The Bunges are active managers of the condo.

Click here to access the tax table to use for this problem.

Required:

Complete the Bunge's federal tax return for 2016. Use Form 1040, Schedule E, Form 3903, and Form 8582 to complete their tax return.

If an amount box does not require an entry or the answer is zero, enter "0". Do not round any percentages. If required, round your answers to the nearest dollar. If required, enter a "loss" as a negative number on the tax form. Do not enter deductions as negative numbers.

Note: Special instructions for Form 8582 - If required, use the minus sign to enter a "loss" as a negative number on the lines 1d, 4 and 16. However, per the instructions on the tax return, enter all numbers in Part II as positive amounts.

On October 1, 2019, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017. The company’s initial chart of accounts follows.

Required:

1. Prepare journal entries in the General Journal to record each of the above transactions for Business Solutions. file:///D:/UAFS/Serial%20Problem%202%20Workpapers%20General%20Journal.pdf

2. Post the journal entries from requirement #1 to the General Ledger . file:///D:/UAFS/Serial%20Problem%202%20Workpapers%20General%20Ledger%20Trial%20Balance.pdf

3. Prepare a trial balance as of the end of November on the worksheet labeled Trial Balance in #2

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

The vice president at your company, Columbia Holdings, has given you a new assignment: “Recently I asked the folks at Patterson Manufacturing to develop a strategy for improving their profitability. They have responded with a proposal. I want you to evaluate the proposal: Is it viable? Is it sustainable? Visit their operations and bring back a recommendation.” As you travel to the site you review a brief history of the firm. Patterson Manufacturing was founded in a small northeastern city more than a century ago. Wesley Patterson started the firm alongside a fast-moving stream that provided mechanical power to drive cutting tools, grinders, lathes, and polishers. These tools were used to produce precision parts other manufacturers needed. The firm quickly established a reputation for producing high-quality products to exacting tolerances. The firm prospered. Wesley studied the industries he served to develop new products that could fill his customers’ emerging needs. He often met with customers to design unique products for them. He referred to his approach as providing “customer-driven creative solutions.” He also kept abreast of new manufacturing materials and technology to ensure his products were of the highest quality. The firm grew steadily and, by 1925, was (and still is) the community’s largest employer. Wesley donated the land that is now the city’s central park. He also paid for constructing the first municipal buildings. More recently, the company was the primary donor for the construction of the municipal library and the local hospital. And the taxes paid by the firm and its employees are responsible for an excellent array of community services, including the Patterson Sports Complex and Patterson Community Center. The Great Depression in the 1930s brought hard times to the company, yet none of its employees were discharged. Instead, the firm and its employees cooperated to spread the available work among its employees by reducing each individual’s working hours (and wages). During that time, the firm also suspended paying dividends to its owners. After the company returned to prosperity in the 1940s, it continued to emphasize customer-driven creative solutions, and its loyal workforce enthusiastically overcame product design challenges. Wesley passed leadership of his business to his son, who later passed it down to Wesley’s grandson, and then to Wesley’s great granddaughter, Jessica Patterson. But five years ago, when Jessica wanted to retire, there was no heir willing to take over the business. Consequently, the plant was sold to your employer, Columbia Holdings. Background Columbia invests in family-owned businesses with a strong presence in niche markets. Columbia retains exSAGE © 2013 IMA Educational Case Journal. All rights reserved. SAGE Business Cases Page 3 of 5 Patterson Manufacturing isting management and local business practices but provides centralized services, such as finance, accounting, insurance, and corporate-level management. Patterson has remained profitable since the acquisition, but its return on investment has been declining. Your first stop at the Patterson complex is a meeting with the controller. He provides some additional background: “Jessica, like her predecessors, spent most of her time with customers developing new products to meet customer needs. She didn’t concern herself with costs. Customers were willing to pay for products that solved problems. Upon Jessica’s retirement, Columbia appointed Paul, our former production manager, to CEO. Paul has done wonders in rationalizing and standardizing our product lines. He substantially reduced manufacturing costs, which led to record profits in the two years following the sale of the company. Those early results have apparently set high expectations for our continuing performance. Our proposal will help move us toward meeting those expectations,” he said. “Our proposal is to stop manufacturing our largest-selling product, the Gudgeon EH40, and instead acquire it from an overseas supplier,” continued the controller. “This product currently represents 30% of our total sales revenue and production volume. But sales have been declining because competitors are offering a similar product at lower prices. We think that by reducing our price by 5% we can increase our unit sales volume by 15%. The increased volume coupled with a lower product cost from the offshore supplier should nearly double our firm-wide profit.” The controller also provided some supporting documents. Exhibit 1 summarizes operations for the five years since Patterson Manufacturing was sold to Columbia Holdings. Year 1 represents the first full year after Jessica retired, and Year 5 is the year that just past. Exhibits 2, 3, and 4 provide an income statement for Year 5, the current employee staffing levels by job title, and a detailed price proposal from the overseas supplier. The controller continued: “The analysis is pretty straightforward. Sales of the Gudgeon EH40 were $27 million last year. The direct material costs came to $14.3 million, while overhead costs of $4.2 million were allocated to the product. But only $2.9 million of the overhead will be avoided if we stop manufacturing the Gudgeon EH40. The remaining overhead costs are nearly all fixed and not subject to reduction in the near future. Our direct selling costs consist mostly of an 8% commission paid to sales representatives. In addition, there’s a $2 million advertising allowance devoted to promoting the Gudgeon EH40 in trade magazines.” He also said, “By outsourcing the Gudgeon EH40, we can release three administrative managers, eight administrative support staff, 128 general production personnel, and 10 supervisors. The firm will incur a one-time charge of $1 million for severance pay and pension contributions for dismissed employees. We’ll also need to spend $200,000 for the construction of receiving facilities for the outsourced product.” The controller continued: “The supplier’s cost quotation (Exhibit 4) needs to be adjusted for the expected 15% increase in volume. The cost for materials and labor will increase proportionately, but the overhead and ‘other’ costs are unlikely to be affected. The supplier’s mark-up will be 10% of the new total cost. In addition to the product cost, Patterson will incur transportation costs to get the product from the manufacturer to our warehouse. The transportation costs are variable and would have been $0.6 million for the volume of product in Year 5.” The Task After his brief overview, the controller hands you the exhibits and says, “You should go through the numbers yourself to ensure that my projection for the increase in profit is correct.” As you make your way to an empty office to review the numbers, the marketing manager approaches you. She pleads, “Don’t let them do this. The proposed action will deal a devastating financial blow to our commuSAGE © 2013 IMA Educational Case Journal. All rights reserved. SAGE Business Cases Page 4 of 5 Patterson Manufacturing nity. Wesley Patterson would have never approved such a move. He loved this town.” Required 1. Using the controller’s projections, prepare an analysis of the expected effect of outsourcing the product on Patterson’s profitability. 2. Would it be a viable alternative to produce the product locally and lower the price to achieve the increase in sales volume? 3. Does the firm have an obligation to maintain employment levels in the town? 4. What risks are associated with the proposal? 5. Make a recommendation to your vice president on whether the proposal should be accepted. Provide your reasoning and any suggestions for additional or alternative actions that Patterson should take.

The data worksheet entitled "FUELCON4" contains the following variables for all 50 states plus the District of Columbia.

Run the regression analysis with FUELCON as the dependent variable and the other four variables as independent variables and obtain the appropriate model diagnostic statistics: Use the Shapiro-Wilk teststatistic to test the assumption of the normality of the model residuals.

(a) What is being tested here? (Choose one)

The assumption of linearity.The assumption of normally-distributed disturbances.    Whether there is a linear relationship between x and y.The assumption of constant variance.The assumption of independence.Whether all of the x variables are important in predicting y.

(b) Which hypotheses are being tested? (Choose one)

H₀: β₁ = 1.0
H_a: β₁ ≠ 1.0H₀: All of the x variables in the model are not important
H_a: Atleast one of the x variables is important    H₀: The model variance is constant
H_a: The model variance is not constantH₀: Disturbances are normal
H_a: Disturbances are non-normalH₀: β₁ = 0
H_a: β₁ ≠ 0

(c) State the decision rule.

Reject H₀ if p < 0.10.
Do not reject H₀ if p ≥ 0.10.Reject H₀ if p > 0.10.
Do not reject H₀ if p ≤ 0.10.    Reject H₀ if p < 0.05.
Do not reject H₀ if p ≥ 0.05.Reject H₀ if p > 0.05.
Do not reject H₀ if p ≤ 0.05.

(d) What is the name of the test statistic? (Choose one)

Anderson-Darling's A²Shapiro-Wilk's W    Test of Constant VarianceKolmogorov-Smirnov's DThe Partial F TestTest of Independence

(e) State the appropriate test statistic name, test statistic value, and the associated p-value (Enter the test statistic value to three decimal places, and the p-value to four decimal places).

---Select--- z A D F t W =  , p  ---Select--- < ≥ ≤ > =  

(f) What conclusion can be drawn from the test result?

Do not reject H₀.The assumption of normally-distributed disturbances has been met.Do not reject H₀. The assumption of independence has been met.    Reject H₀. There is a linear relationship between x and y.Reject H₀. The assumption of independence has not been met.Do not reject H₀. There is not a linear relationship between x and y.Reject H₀. The assumption of constant variance has not been met.Do not reject H₀. The assumption of constant variance has been met.Reject H₀. The assumption of normally-distributed disturbances has not been met.