7 Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and no routine work, such as removing asbestos contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way, "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.50 to determine the bid price. Since our average cost is only $2455 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart" To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square thousand square feet Estimating and job setup Number of jobs 500 jobs Number of Working on nonroutine jobs 100 nonroutine jobs nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. 1,60 feet Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost $ 407,000 800,00 96,000 56,000 300,000 490,000 $2,149,000 Distribution of Resource Consumption Across Activities Working on Removing Estimating and Nonroutine Asbestos Job Setup Jobs Wages and 183 30% salaries Disposal fees 70% ex 38% Equipment Other Total 10% 100% GE 100 7 Other (organization sustaining costs and adle capacity costs) None Note: The 10e nonroutine jobs are included in the total of Seo jobs. Both nonroutine jobs and routine jobs require estimating and setup. 2 polis Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost $ 487,000 800,000 96,000 56,000 380,000 490, cee $2,149,000 book Pin res Other Total 10% 18ex ex 100 Distribution of Resource Consumption Across Activities Working on Removing Estimating and Nonautine Asbestos Job Setup Jobs Wages and sex 10% 30% salaries Disposal fees 70 ex 3ex Equipment 40% 5% depreciation On-site 60% 25% 15% supplies office expenses 15% 35% 20% Licensing and 25% 60% insurance 2ex 35% 10 ex 100 1eex 30 15% 100% Required: 1 Perform the first stage allocation of costs to the activity cost pools 2. Compute the activity rates for the activity cost pools 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity based costing system a. A routine 1,000 square foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job c. A nonroutine 2,000-square-foot asbestos removal job Complete this question by entering your answers in the tabs below. ints Required: 1. Perform the first stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system a. A routine 1,000 square foot asbestos removal job. b. A routine 2,000 square foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. eBook Print Complete this question by entering your answers in the tabs below. Beferences Reg 1 Reg 2 Red 3A to 3C Perform the first stage allocation of costs to the activity cost pools. Removing asbestos Estimating and Job Set Working on Non routine Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost Red Req 2 > ex 30% ex 100% 70% 40% 5% 20% 35% 100% Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance 60x 25% 15% 2 points 15% 35% 20x ex 100x 30% 100% 15% 1eex 25% % 6ex eBook Print Required: 1. Perform the first stage allocation of costs to the activity cost pools 2. Compute the activity rates for the activity cost pools 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity based costing system a A routine 1000-square-foot asbestos removal job. b. A routine 2,000 square-foot asbestos removal job c. A nonroutine 2.000 square foot asbestos removal job References Complete this question by entering your answers in the tabs below. Reg. Reg 2 Reg 3A to ac Compute the activity rates for the activity cost pools. Activity Rate per thousand square feet Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs per job per nonroutine Job PRACTICE PROBLEMS FOR MID TERM EXAM Saved 60% 25% 15% SAU supplies office expenses Licensing and insurance 20% 7. ex 100% 30% 100% 15% 100% 25% OK 6e 2 points Required: 1. Perform the first stage allocation of costs to the activity cost pools 2. Compute the activity rates for the activity cost pools 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity based costing system. a. A routine 1000 square foot asbestos removal job. b. A routine 2,000 square foot asbestos removal job c. A nonroutine 2000 square foot asbestos removal job. eBook Print Complete this question by entering your answers in the tabs below. References Reg 1 Reg 2 Req3 to 30 Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. (Round the "Average cost per thousand square feet' to 2 decimal places.) a. A routine 1,000-square foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2.000-square-foot asbestos removal lob Show less Routine Routine Nonroutine 1,000 sq.ft. 2.000 sq.ft. 2,000 sq. ft. job job job Total cost of the job Average Cost per thousand square feet