Question: Please help. I cannot figure this out. Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a




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 $3.20 to determine the bid price. Since our average cost is only $2745 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 Activity Measure Total Activity Removing asbestos Thousands of square feet Bae thousand square feet Estimating and job setup Number of jobs 500 fobs Working on nonroutine Jobs Number of noncoutine jobs 100 nonroutine jobs Other (organization sustaining costs and idle capacity costs) Note The 100 nonroutine Jobs are included in the total of 500 jobs, both nanroutine jobs and routine jobs require estimating and setup None Costs for the Year Wages and salaries Disposal fees Equipment deprecation On-site supplies office expenses Licensing and insurance Total cost 470,000 301.000 110,000 68,000 370,000 570,000 $ 2,389,000 Distribution of Resource Consumption Across Activities Estimating Removing and job Asbestos Setup Wages and salaries 60% 10% Disposal fees 60% OR Equipment depreciation 50% 10x On-site supplies 60% 25 Office expenses 10% dek Licensing and insurance 30 OX Working on Nonroutine Jobs zex COK Other 10% 0% 25% 0% 35% Total 100% 100% 100% 100% 100% 100% 15% 50% 20% Required: 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 routine 1000-square-foot asbestos removal job b. A routine 2000 square foot asbestos removal Job. 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 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3A to 30 Other Total Perform the first-stage allocation of costs to the activity cost pools Removing Estimating Working on and Job Nonroutine asbestos Setup Jobs Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost Req 1 Req 2 Req 3A to 3C Compute the activity rates for the activity cost pools. Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Activity Rate per thousand square feet per job per nonroutine job Reg 1 Reg 2 Reg 3A t 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. (Round the "Average Cost per thousand square feet" to 2 decimal places.) 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. Show less Routine Routine Nonroutine 1,000 sq. ft. 2,000 sq. ft. 2,000 sq. ft. job job job Total cost of the job Average Cost per thousand square feet
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