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Mercer Asbestos Removal Company removes potentially toxic asbestas insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and

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Mercer Asbestos Removal Company removes potentially toxic asbestas 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 supervision believe that nontoutine 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 $2.435 per square foot that leaves enough cushion to take care of the additional costs of nontoutine 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 1.000 thousand square feet Estimating and job setup Number of jobs 500 jobs Working on non routine jobs Number of nonroutine jobs 100 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. Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance Total cost 406,000 793, 000 96,000 58.000 280,000 502, eee $2,135,000 Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Non routine Asbestos Setup Jobs Wages and salaries 60% 104 204 Disposal fees 604 ex 409 Equipment depreciation 404 54 204 On-site supplies 705 105 Office expenses 18% 35% 258 Licensing and insurance 30% 50% Other 10 04 354 84 305 20% Total 1889 1001 1005 100 100 100% 20% 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. Reg 1 Req2 Reg 3A to 3 Other Total Jobs Perform the first stage allocation of costs to the activity cost pools. Estimating Working on Removing and Job Nonroutine asbestos Setup Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Reg 1 Reg 2 Req 3A to 3C Other Total Perform the first-stage allocation of costs to the activity cost pools. Removing Estimating Working on asbestos and Job Nonroutine Setup Jobs Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost Reg 2 > Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req t 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 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3A to BC Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following fobs 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 job. Show less Routine Routine Nonroutine 1,000 sq. ft. 2.000 s. IL 2.000 sq.ft Job Job job Total cost of the job Average Cost per thousand square feet Reg 2

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