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Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The companys estimator has been involved in a long-simmering dispute with

Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The companys 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 $4,400 per thousand square metres to determine the bid price. Since our average cost is only $3,400 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 m2
Estimating and job setup Number of jobs 240 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 $ 240,000
Disposal fees 660,000
Equipment depreciation 92,000
On-site supplies 68,000
Office expenses 222,000
Licensing and insurance 418,000
Total cost $ 1,700,000

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 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

b. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

c. A non-routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

4. Not available in Connect.

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