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Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company's estimator has been involved in a longsimmering dispute with the onsite work supervisors. The on-site supervisors claim that the estimator does not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work. such as removing asbestoscontaminated ceiling plaster in industrial buildings. The onsite 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 metres by $4,000 per thousand square metres to determine the bid price. Since our average cost is only $3,000 per thousand square metres. that leaves enough cushion to take care of the additional costs of non-routine work that shows up. Besides, it is difcult 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 ABC study of all of its costs. Data from the ABC system follow: Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square metres 500,000 m2 Estimating and job setup Number ofjobs 200 jobs\" Working on nonroutine jobs Number of nonroutine jobs 25 nonroutine jobs Other (costs of idle capacity and Not applicable; these costs are organizationsustaining costs} not allocated to jobs. * The total number of jobs includes non-routine jobs as well as routine jobs . Non-routine jobs as well as routine jobs require estimating and setup work . Wages and salaries 200,000 Disposal fees 500,000 Equipment depreciation 80.000 On - site supplies 60.000 Office expenses 190, 000 Licensing and insurance 370,000 Total cost $ 1, 500,000 Distribution of Resource Consumption across Activity Cost Fools Estimating Working on Removing and Job Non - routine* Asbestos Getup Jobs Other Total Wages and salaries 40%/0 10% 35 9/0 159/0 100% Disposal fees 70% 09/6 100%/0 Equipment depreciation 100%/ 9/0 5 5 On - site supplies 15 % 101 9/0 Office expenses 109 100%/ Licensing and insurance 50%/0 10 %/6 100%/Required . 1. Perform the first - stage allocation of costs to the activity cost pools . ( Do not leave any empty spaces" input a O wherever it is required . ! Removing Estimating Working on Asbestos and Job Non - routine Other Totals Setup Jobs Wages and salaries Disposal fees Equipment depreciation On - site Supplies Office expenses Licensing and insurance Total cost2. Compute the activity rates for the activity cost pools. Re moving asbestos per thousand square metres Estimating and job setup per job Working on nonroutine jobs per nonroutine job 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square metres of each of the following jobs according to the ABC system: a. A routine 2,000-square-metre asbestos removal job. {Round "Average cost per thousand square metres" answers to 2 decimal places.) Total cost or the iob -| Average cost per thousand square metres b. A routine 4,000squaremetre asbestos removal job. [Round "Cost per thousand square metres" answers to 2 decimal places.) Total cost of the job Cost per thousand square metres c. A nonroutine 2,000squaremetre asbestos removal jot]. {Round "Cost per thousand square metres\" answers to 2 decimal places.) Total cost of the job Cost per thousand square metres
