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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 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 $4,600 per thousand square metres to determine the bid price. Since our average cost is only $3,600 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 difficult 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 m Estimating and job setup Number of jobs 220 jobs* Working on non-routine jobs Number of non-routine 25 non-routine jobs jobs Other (costs of idle capacity Not applicable; these and organization-sustaining costs are not allocated to costs) 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 $ 260,000 Disposal fees 690,000 Equipment depreciation 98,000 On-site supplies 72,000 Office expenses 238,000 Licensing and 442,000 insurance Total cost $1,800,000Distribution of Resource Consumption across Activity Cost Pools Working on Estimating Non- Removing and Job routine Asbestos Setup Jobs Other Total Wages and salaries 40% 10% 35% 15% 100% Disposal fees 75% 0% 25% % 100% Equipment 45% 0% 40% 15% 100% depreciation On-site supplies 50% 15% 25% 10% 100% Office expenses 10% 40% 30% 20% 100% Licensing and 50% 0% 45% 5% 100% insurance 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 Other Asbestos and Job Non-routine Totals Setup Jobs Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total costCompute the activity rates for the activity cost pools. {Round your answers to 2 2' decimal places.) teammates Emmi-1mm setup wommnmn-muunejm _ 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-squaremetre asbestos removal job. [Round your answers to 2 decimal places.) Total cost of the job - Average cost per thousand square metres _ b. A routine 4,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job - Cost per thousand square metres _ c. A non-routine 2.000-square-metre asbestos removaljob. (Round your answers to 2 decimal places.) Total cost of the job _ Cost per thousand square metres _
