Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Perform the first-stage allocation of costs to the activity cost pools. Using the activity rates you have computed, determine the total cost and the average
Perform the first-stage allocation of costs to the activity cost pools. 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 2 decimal piaces.) a. A routine 1,000 -square-foot asbestos removal job. b. A routine 2,000-square-foot sbestos removal job. c. A nonroutine 2,000-square-fout asbestos removal job. Mercer Asbestos Removai Company removes potentialiy toxic asbestos insulation and related products from buildings. There has been a long-simmening 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-contominated celling plaster in industrial buidings. The on-site supervisors believe that nonroutine work is far more expensive than routhe work and should bear higher customer charges. The estimator sums up his posivion in this way: "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply muluply the square footage by $280 to determine the bid price. Since our average cost is only $2305 per square foot, that leaves enough cushion to take care of the additional costs of nonroutune work that shows up. Besides, It is difficult to know what is routine or not routine untll you actually start teaning things apart" To shed ilght on this controversy, the company initated an activity-based costing stucy of all of its costs, Data from the activity-based costng system follow Note. The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estumating and setup. Requitred: 1. Pertorm the first-stage allocation of costs to the actuvity 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 1000 -square- foot asbestos removal job b. A routine 2.000 -square-foot asbestos removaljob c. A nonroutine 2,000 square-4oot asbestos removal job
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started