Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of 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 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 footage by $2.80 to determine the bid price. Since our average cost is only $2.575 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine 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 activity-based costing study of all of its costs. Data from the activity-based costing system follow. Activity Cost Pool Removing asbestos Estimating and job setup Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None 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 Wages and salaries Disposal fees On-site supplies Equipment depreciation Office expenses Licensing and insurance Total cost $372,000 775,000 96,000 58,000 280,000 480,000 $2,061,000 Distribution of Resource Consumption Across Activities Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Required: Removing Estimating and Job Working on Nonroutine Asbestos Setup Jobs Other Total 60% 10% 20% 10% 100% 60% 0% 40% 0% 100% 50% 10% 15% 25% 100% 70% 20% 10% 0% 100% 10% 40% 20% 30% 100% 25% 0% 60% 15% 100% 1. Perform the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1.000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of 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 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 footage by $2.80 to determine the bid price. Since our average cost is only $2.575 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine 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 activity-based costing study of all of its costs. Data from the activity-based costing system follow. Activity Cost Pool Removing asbestos Estimating and job setup Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None 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 Wages and salaries Disposal fees On-site supplies Equipment depreciation Office expenses Licensing and insurance Total cost $372,000 775,000 96,000 58,000 280,000 480,000 $2,061,000 Distribution of Resource Consumption Across Activities Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Required: Removing Estimating and Job Working on Nonroutine Asbestos Setup Jobs Other Total 60% 10% 20% 10% 100% 60% 0% 40% 0% 100% 50% 10% 15% 25% 100% 70% 20% 10% 0% 100% 10% 40% 20% 30% 100% 25% 0% 60% 15% 100% 1. Perform the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. a. A routine 1.000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.
Expert Answer:
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
Students also viewed these algorithms questions
-
This is a "common" short essay that the department usually assigns to all sections of COMM 228/J 201. The purpose is to attempt to measure "media literacy" and critical thinking across a broad range...
-
Harry Bhel carries a business as a sole proprietorship. During its 2022 fiscal period, its first year of operations, the business had cash sales of $123,000. It also has sales on account of $46,000,...
-
How is the concept of an association related to that of mobility?
-
The following are the transactions relating to the formation of Gray Mowing Services Incorporated and its first month of operations. a. The firm was organized and the initial stockholders invested...
-
A six-cylinder, four-stroke petrol engine develops \(40 \mathrm{~kW}\) when running at \(3000 \mathrm{rpm}\). The volumetric efficiency at NTP is \(85 \%\). Indicated thermal efficiency is \(25 \%\)....
-
The production budget for Ensinada Mfg. Co. for the second quarter of 2010 follows. Required: (a) Find the missing numbers represented by the numbers (1) through (9). (b) Was the ending inventory in...
-
Chuck Wagon Grills, Incorporated, makes a single product-a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow: Units in beginning inventory Units...
-
The grammar (with start nonterminal S): S === (P)S|# P == (P)P|e describes the language of balance parentheses-with a '#' tacked on the end of the string. Construct a parse tree for each of: (a) (6...
-
In recent decades, economic inequality (both income inequality and wealth inequality) has become a prominent topic in American politics. If it is a problem, given our discussion of Fiscal and...
-
Blossom, Inc., has 16300 shares of 4%, $100 par value, cumulative preferred stock and 59100 shares of $1 par value common stock outstanding at December 31, 2026. There were no dividends declared in...
-
Can you explain why the bottom one is preferred? We are studying security vulnerabilities. Noncompliant void readData() throws IOException{ BufferedReader br = new BufferedReader(new...
-
The Monarch Division of Allgood Corporation has a current ROI of 13 percent. The company target ROI is 9 percent. The Monarch Division has an opportunity to invest $5,700,000 at 11 percent but is...
-
Discuss elements of uncertainty for internal shareholders that remain or are introduced when using CVP analysis to evaluate profits and revenue such as profit planning and break-even planning. Please...
-
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will...
-
Apply Jacobis method to the given system. Take the zero vector as the initial approximation and work with four-significant-digit accuracy until two successive iterates agree within 0.001 in each...
-
Why is it important to pay attention to cultural differences when interviewing a client?
-
What does the term "unauthorized practice of law" mean, and how does it limit your relationship with a client?
-
Why is it important to acknowledge how a client is feeling at the initial interview?
Study smarter with the SolutionInn App