Please please please help me with this problem on Activity-Based Costing and Bidding on Jobs.
Problem 7-18 Activity-Based Costing and Bidding on Jobs [LO7-2, LO7-3, L07-4] Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a longsimmering 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: \"Myjob is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.80 to determine the bid price. Since our average cost is only $231 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine 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 activity-based costing study of all of its costs. Data from the activity- based costing system follow: Antivity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square feet 869'thousand square feet Estimating and job setup Number of jobs 499 jobs Working on nonroutine jobs Number of nonroutine jobs 169 nonroutine jobs other (organization-sustaining costs and idle capacity costs) None Note: The 189 nonroutine jobs are included in the total of 489 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Wages and salaries 5 332,989 Disposal fees 748,980 Equipment depreciation 96, 690 (in-site supplies 54,880 Office expenses 248, 880 Licensing and insurance 446,998 Total cost 5 1, 396,999 \"ages and salaries Disposal fee-s T9: 8% 39% 9% 199% Equipment depreciation 49% 5% 29% 35% 199% On-site supplies 69% 25% 15% 6% 198% Office expenses 18% 48% 15% 35% 189% Licensing and insurance 25% ex 69% 15% 199% E a. 1. Perform the rst-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 _._ _-___._J .____ J__ .._ _ ___..'__.___, _______ _ _.._ ____. ____ _.._. ____ ''a ____'___ _.___.___._. _-._._._ ____ _. __ the following jobs according to the activitybased costing system. a. A routine 1,000squarefoot asbestos removal job. b. A routine 2,000-squarefoot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. Cmeteisquaonbramuingyowminlembsbdw. Perform the rststage allocation of costs to the activity cost pools. Wages and Salaries Disposal fees Equipment depreciation On-site supplies Oice expenses Licensing and insurance Total cost Wkqmiunhymlningyuwminmlals below. Req 1 Req 2 Req 3A to BC Compute the activity rates for the activity cost pools. Removing asbestos per thousand square feet Estimating and job setup Working on nonroutine jobs per nonroutine job Req 1 Req 2 Req 3A to ac 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 activitybased costing system. (Round the "Average Cost per thousand square feet" to 2 decimal places.) a. A routine 1,000squarefoot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. :2. A nonroutine 2,000squarefoot asbestos removal job. Total cost of the job Average Cost per thousand square feet
