Chapter 7 Assignment A Saved He Problem 7-20 Activity-Based Costing and Bidding on Jobs (LO2, LO3] 16 points Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company's estimator has been involved in a long-simmering dispute with the on-site work supervisors. The on-site supervisors claim that the estimator does not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and non-routine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that non-routine 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 metres by $4,900 per thousand square metres to determine the bid price. Since our average cost is only $3,900 per thousand square metres, that leaves enough cushion to take care of the additional costs of non-routine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart. eBook Ask Print To shed light on this controversy, the company initiated an ABC study of all of its costs. Data from the ABC system follow: Activity Cost Pool Removing asbestos Estimating and job setup Working on non-routine jobs Other (costs of idle capacity and organization-sustaining costs) Activity Measure Thousands of square metres Number of jobs Number of non-routine jobs Not applicable; these costs are not allocated to jobs. Total Activity 500,000 m2 250 jobs* 27 non-routine jobs * The total number of jobs includes non-routine jobs as well as routine jobs. Non-routine jobs as well as routine jobs require estimating and setup work. $ Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses licencing and incunanca 290,000 735,000 107,000 78,000 262,000 178 aaa Chapter 7 Assignment ( Saved * The total number of jobs includes non-routine jobs as well as routine jobs. Non-routine jobs as well as routine jobs require estimating and setup work. Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance $ 290,000 735,000 107,000 78,000 262,000 478,000 points Total cost $1,950,000 eBook Ask Print Distribution of Resource Consumption across Activity Cost Pools Working on Non-routine Jobs Removing Asbestos 40% 75% 45% 35% Estimating and Job Setup 10% 0% 0% 15% 40% 0% Other 15% 0% Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance 25% 40% 25% 30% 45% 15% 10% Total 100% 100% 100% 100% 100% 100% 50% 20% 10% 50% 5% Required: 1. Perform the first-stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a O wherever it is required.) Removing Estimating and lab Working on Man rantina Chapter 7 Assignment i Saved Required: 1. Perform the first stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a O wherever it is required.) Removing Asbestos Estimating and Job Setup Working on Non-routine Jobs Other Totals 16 points Wages and salaries eBook Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost LL Ask Print 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Removing asbestos Estimating and job setup Working on non-routine jobs Activity Rate per thousand square metres per job per non-routine job Chapter 7 Assignment i Saved 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square metres of each of the following jobs according to the ABC system: a. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) points Total cost of the job Average cost per thousand square metres eBook Ask Print b. A routine 4,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres Chapter 7 Assignment A Saved b. A routine 4,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) 16 points Total cost of the job Cost per thousand square metres estres eBook Ask Print c. A non-routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres