Question:
Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products 'om buildings. The company's estimator has been involved in a long-simmering dispute with the on-site 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 non-routine work. such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that non-routine 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 $4,500 per thousand square metres to determine the bid price. Since our average cost is only $3.500 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 diicult to know what is routine or not routine until you actually start tearing things aparL' 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 Pleasure Total Activity Removing asbestos Thousands of square metres 583,998 m2 Estimating and job setup Number of jobs 398 jobs* working on non-routine jobs Number of non-routine jobs 25 non-routine jobs other [costs of idle capacity and Not applicable; these costs are not organizationsustaining costs] allocated to jobs. * The total number ofjobs includes non-routinejobs as well as routine jobs. Non-routine jobs as well as routine jobs require estimating and setup work. Wages and salaries $ 253,999 Disposal fees ?5, Equipment depreciation 95,999 Dn-site supplies TB,BBB Office expenses 233,936 Licensing and insurance 433,936 Total cost $1,153,33 Distribution of Resource Consumption across Activity Cost Pools Estimating Working on Removing and Job Non-routine Asbestos Setup Jobs Other Total Wages and salaries 45% 10% 30% 15% 100% Disposal fees 70% 0% 30% 0% 100% Equipment depreciation 40% 0% 35% 25% 100% On-site supplies 55% 15% 25% 5% 100% Office expenses 10% 40% 35% 15% 100% Licensing and insurance 50% 0% 40% 10% 100% Required. 1. Perform the first-stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.) Removing Estimating Working on and Job Non-routine Other Totals Asbestos Setup Jobs Wages and salaries $ Disposal fees 0 Equipment depreciation 0 On-site supplies O Office expenses 0 Licensing and insurance 0 O $ $ O Total cost O $ 0 $ 02. Compute the activity rates for the activity cost pools. {Round your answers to 2 decimal places] Removing asbestos - per thousand square metres ewmatmmbm m............... 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 1,GGD-square-metre asbestos removaljob. [Bound your answers to 2 decimal places.) Total east of the job - Average east per thousand square metres b. A routine 2.000-square-metre asbestos removal job. {Round your answers to 2 decimal places] Total oost of the job Cost per thousand square metres c. A non-routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres
