Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering...

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Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim the estimators do not adequately distinguish between routine work, such as removing asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe 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 footage by $2.80 to determine the bid price. Because our average cost is only $2.575 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work. 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 gathered the following activity-based costing data: Activity Measure Thousands of square feet Number of jobs Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Number of nonroutine jobs Total Activity 800 thousand square feet 400 jobs 100 nonroutine jobs Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Disposal fees On-site supplies Wages and salaries Equipment depreciation Licensing and insurance Total cost Office expenses $ 372,000 775,000 96,000 58,000 280,000 480,000 $ 2,061,000 Distribution of Resource Consumption Across Activities Estimating and Job Working on Nonroutine Removing Asbestos Setup Jobs Other Total Wages and salaries 60% 10% 20% 10% 100% Disposal fees 60% 0% 40% 0% 100% Equipment depreciation 50% 10% 15% 25% 100% On-site supplies 70% 20% 10% 0% 100% Office expenses 10% 40% 20% 30% 100% Licensing and insurance 25% 0% 60% 15% 100% Required: Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim the estimators do not adequately distinguish between routine work, such as removing asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe 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 footage by $2.80 to determine the bid price. Because our average cost is only $2.575 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work. 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 gathered the following activity-based costing data: Activity Measure Thousands of square feet Number of jobs Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Number of nonroutine jobs Total Activity 800 thousand square feet 400 jobs 100 nonroutine jobs Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Disposal fees On-site supplies Wages and salaries Equipment depreciation Licensing and insurance Total cost Office expenses $ 372,000 775,000 96,000 58,000 280,000 480,000 $ 2,061,000 Distribution of Resource Consumption Across Activities Estimating and Job Working on Nonroutine Removing Asbestos Setup Jobs Other Total Wages and salaries 60% 10% 20% 10% 100% Disposal fees 60% 0% 40% 0% 100% Equipment depreciation 50% 10% 15% 25% 100% On-site supplies 70% 20% 10% 0% 100% Office expenses 10% 40% 20% 30% 100% Licensing and insurance 25% 0% 60% 15% 100% Required:

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Mercer Asbestos Removal Company ActivityBased Costing Analysis 1 Calculate the activity rates for ea... View the full answer