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 multip the square footage by $2.60 to determine the bid price. Since our average cost is only $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 fit 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 Measure Total Activity Activity Cost Pool Removing asbestos Thousands of square feet 1,000 thousand square feet Estimating and job setup Number of jobs 500 jobs 109 nonroutine jobs Number of nonroutine jobs Working on 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 Check my work Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost $ 402,000 737,000 104,000 64,000 330,000 450.000 $ 2,097,000 Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Nonroutine Asbestos Setup Jobs Wages and salaries ses 15% 20% Disposal fees 685 0% 40% Equipment depreciation sex 1e 15% On-site supplies 70% 2ex 105 Office expenses 10% 35% 255 Licensing and insurance 30% ex 50% Other 155 es 25% 0% 305 2ex Total 100% 100% 100% 100 2005 100% 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. Help Save & EN Submit 1e 30% 35% ex 3ox 20% Check my werk Office expenses 25 2005 Licensing and insurance sex 100% 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. Req 1 Reg 2 Reg 3A to 30 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 Wages and salaries Nierneal food
