Mercer Asbestos Removal Company removes potentially toxic asbestos Insulation and related products from butings. 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 actvity-based costing study of all of its costs. Data from the cavity-based costing system follow Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square feet see thousand quare feet Estimating and job setup Number of jobs 500 jobs Working on nonroutine Jobs Number of nonroutine Jobs 100 no routine Jobs other organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine Jobs are included in the total of 5ee jobs. Both noroutine 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 300.000 700.000 90.000 50.000 2ee.co 460,000 $ 1,740,000 Distribution of Resource Consumption Across Activities Estimating Removing and Job Asbestos Setup Wages and salaries sex 12 Disposal fees ex Equipment depreciation 40 On-site supplies 6ex Office expenses 18% Licensing and insurance 38% ent Working on Nonroutine Jobs 35 Other sex ex 35% Total 100% ex 100% 23 10 25% Sex 304 204 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 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 2000-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 JA to 30 Other 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 Total
