Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There long-simmering...

 

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Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the es not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older home nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors belie nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up h this way: "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the squ by $3.20 to determine the bid price. Since our average cost is only $2.745 per square foot, that leaves enough cushion to take additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actuall 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 activ costing system follow: Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle Costs for the Year Wages and salaries Disposal fees Equipment depreciation capacity costs) None Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. On-site supplies Office expenses Licensing and insurance Total cost Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs $ Distribution of Resource Consumption Across Activities 60% 60% 50% 60% 10% 30% 470,000 801,000 110,000 68,000 370,000 570,000 $ 2,389,000 Removing Estimating and Job Asbestos Setup 10% 0% 10% 25% 40% 0% Working on Nonroutine Jobs Other Total 20% 10% 100% 40% 0% Required: 1. Perform the first-stage allocation of costs to the activity cost pools. Total Activity 800 thousand square feet 500 jobs 100 nonroutine jobs 15% 15% 15% 50% 100% 100% 100% 35% 100% 20% 100% 25% 0% 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 following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job. Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the es not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older home nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors belie nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up h this way: "My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the squ by $3.20 to determine the bid price. Since our average cost is only $2.745 per square foot, that leaves enough cushion to take additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actuall 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 activ costing system follow: Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle Costs for the Year Wages and salaries Disposal fees Equipment depreciation capacity costs) None Note: The 100 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. On-site supplies Office expenses Licensing and insurance Total cost Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs $ Distribution of Resource Consumption Across Activities 60% 60% 50% 60% 10% 30% 470,000 801,000 110,000 68,000 370,000 570,000 $ 2,389,000 Removing Estimating and Job Asbestos Setup 10% 0% 10% 25% 40% 0% Working on Nonroutine Jobs Other Total 20% 10% 100% 40% 0% Required: 1. Perform the first-stage allocation of costs to the activity cost pools. Total Activity 800 thousand square feet 500 jobs 100 nonroutine jobs 15% 15% 15% 50% 100% 100% 100% 35% 100% 20% 100% 25% 0% 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 following jobs according to the activity-based costing system. a. A routine 1,000-square-foot asbestos removal job.

Answer rating: 100% (QA)

solution wages and salaries disposal fees equipment depreciation onsite supplies office expense Lice... View the full answer