Question
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
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 of jobs | 250 | jobs* |
| Working on non-routine jobs | Number of non-routine jobs | 25 | non-routine jobs |
| Other (costs of idle capacity and organization-sustaining costs) | Not applicable; these costs are 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 | $ | 210,000 |
|
| Disposal fees |
| 615,000 |
|
| Equipment depreciation |
| 83,000 |
|
| On-site supplies |
| 62,000 |
|
| Office expenses |
| 198,000 |
|
| Licensing and insurance |
| 382,000 |
|
| Total cost | $ | 1,550,000 |
|
|
| Distribution of Resource Consumption across Activity Cost Pools | ||||||||||||||
|
| Removing Asbestos | Estimating and Job Setup | Working on Non-routine Jobs | Other | Total | ||||||||||
| Wages and salaries |
| 40 | % |
| 10 | % |
| 35 | % |
| 15 | % |
| 100 | % |
| Disposal fees |
| 75 | % |
| 0 | % |
| 25 | % |
| 0 | % |
| 100 | % |
| Equipment depreciation |
| 45 | % |
| 0 | % |
| 40 | % |
| 15 | % |
| 100 | % |
| On-site supplies |
| 50 | % |
| 15 | % |
| 25 | % |
| 10 | % |
| 100 | % |
| Office expenses |
| 10 | % |
| 40 | % |
| 30 | % |
| 20 | % |
| 100 | % |
| Licensing and insurance |
| 50 | % |
| 0 | % |
| 45 | % |
| 5 | % |
| 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.)
2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)
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 your answers to 2 decimal places.)
b. A routine 4,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)
c. A non-routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)
4. This part of the question is not part of your Connect assignment.
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Auditing and Assurance Services A Systematic Approach
Authors: William Messier, Steven Glover, Douglas Prawitt
9th edition
1308361491, 77862333, 978-1259248290, 9780077862336, 1259162346, 978-1259162343
