Chapter 7 HW i Saved Help Save & Exit Submit Check my work 4 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 10 points homes, and nonroutine 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 Skipped 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 $3.00 to determine the bid price. Since our average cost is only $2.755 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." Boo costing system follow: To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based Print Activity Cost Pool Activity Measure Number of jobs Total Activity 1pp thousand square feet Working on nonroutine Number of nonroutine jobs 100 nonroutine jobs References Other (organization-sustaining costs None Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries Disposal fees 420,60 Print Equipment depreciation On-site supplies 96 ,00 Office expenses Licensing and insurance 320 ,00 520,000 References Total cost 6 2, 232,000 Distribution of Resource Consumption Across Activities Estimating Removing and Job Working or Wages and salaries Setup Jobs Print Disposal fees Equipment depreciation 68* 20% office supplies References Licensing and insurance 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. Print 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 References Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3A to 3C Reference Perform the first-stage allocation of costs to the activity cost pools. Removing Estimating asbestos and Job Working on Setup Nonroutine Other Tota Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost 0 9 Req 1 Req 2 > Prev 4 of 4 Next >Req 1 Req 2 Req 3A to 3C :Compute the activity rates for the activity cost pools. Activity Cost Pool Activity Rate Removing asbestos per thousand square feet Estimating and job setup per job Working on nonroutine jobs per nonroutine job Ken 1 Req2 'Req 3Ato 3C Using the activity rates you have computed, determine the tolal cost and the average cost per thousand square feet of each of the following jobs according to the activitybased costing system. (Round the "Average Cost per thousand square feet" to 2 decimal places.) a. A routine LOGOsquarefoot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000squarefoot asbestos removal job. Total cost of the job Average Cost per thousand square feet _
