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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
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 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 $4,700 per thousand square metres to determine the bid price. Since our average cost is only $3.700 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 Estimating and job setup Number of jobs 260 jobs Number of non-routine Working on non-routine jobs 25. non utine jobs Jobs Other (costs of idle capacity and Not applicable; these organization-sustaining costs) not allocated to jobs. m2 costs are 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. - Assignment B. Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and Insurance $ 270,000 705,000 101,000 74,000 246,000 454.000 Total cost $1,850,000 Distribution of Resource Consumption across Activity Cost Pools Other Total 100% Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and Insurance Working on Estimating Non Removing and Job routine Asbestos Setup Jobs 45% 10% 30% 70% 0% 30% 09. 35% 55% 15% 25% 10% 40% 3596 509 09 40% 15% 0% 25% 5% 15% 10% 100% 100% 10096 100% 100% 40%
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