LAIL Submit 10 Check my work 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 $250 to determine the bid price. Since our average cost is only $2.235 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 feet see thousand square feet Estimating and job setup Number of jobs See jobs Working on nonroutine jobs Number of nonroutine Jobs 1ee nonroutine fobs Other (organization Sustaining costs and idle capacity costs) Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both monroutine Jobs and routine jobs require estimating and setup ances None Costs for the Year lages and salaries $ 317.000 Check my work 10 Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square feet see thousand square feet Estimating and job setup Number of jobs 500 jobs Working on nonroutine jobs Number of nonroutine jobs 1ee nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine jobs are included in the total of 5ee jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost 317, eee 712,000 97,000 55,000 220,000 42e, eee $ 1,821,800 Other Total Distribution of Resource Consumption Across Activities Estimating Removing and Job Asbestos Setup Wages and salaries SOS 15% 60 Disposal fees 303 ies Equipment depreciation ninta unitat Working on Nonroutine Jobs 201 401 15 23 Distribution of Resource Consumption Across Activities Estimating Removing and Job Asbestos Setup Wages and salaries 50% 15% Disposal fees 60% 0% Equipment depreciation 50% 10% On-site supplies 60% 25% Office expenses 40% Licensing and insurance 3ex ex Working on Nonroutine Jobs 20% 40x 15% 15% 15% 603 Other 15% ex 25% B% 35% 10% Total 100% 100% 100% 100% 100% 100% 10% 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 te 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. e JA TO 3C Perform the first stage allocation of costs to the activity cost pools. Removing asbestos Estimating and Job Setup Working on Nonroutine Jobs Other Total $ 0 0 0 0 Wages and salaries Disposal fees Equipment depreciation On-site supplies once expenses Licensing and insurance Total cost o 0 05 05 05 0$ $ Reg 2 > Newt c. A nonroutine 2,000-square-foot asbestos removal job. Complete this question by entering your answers in the tabs below. L Req 2 us Req 1 Req 3A to 30 ed Compute the activity rates for the activity cost pools. k ht Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs. Activity Rate per thousand square feet per job per nonroutine job ences