just 3A and 3C
Problem 7-18 (Static) Activity-Based Costing and Bidding on Jobs (L07-2, LO7-3, L07-4) 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 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 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 $2.175 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 Coat Pool Activity Mauro Total Activity Removing asbestos Thousands of square feet 000 thousand square feet Estimating and job setup Number of Jobs 500 jobs Working on nonroutine Jobs Number of nonroutine Jobs 100 nonroutine Jobs Other (organization-sustaining costs and idle capacity costs) None Hotel The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine Jobs and routine jobs require estimating and setup. Costs for the Year Wages and salarion Disposal fees Equipment depreciation On-site supplies ortice expenses Licensing and insurance Total cost 300,000 700,000 90,000 50,000 200,000 400.000 $ 1,740,000 Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Nonroutine Asbestos Setup Jobs Wages and salaries 501 308 Disposal fees 601 OR Equipment depreciation 56 208 On-site supplies 608 300 108 office expenses 108 358 258 Licensing and insurance 30% 08 508 109 400 401 Other 100 08 350 08 308 200 Total 1000 100 1001 1001 1000 1008 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 squa 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 A nonroutine 2,000-square-foot asbestos removal job Answer is not complete Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3A to 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. (Round the "Average cost per thousand square feet to decimal places)
