Mercer Asbestos Removal Company removes potentially toxic asbestos Insulation an
ID: 2342995 • Letter: M
Question
Mercer Asbestos Removal Company removes potentially toxic asbestos Insulation and related products from bulldings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-slte supervMsors clalm that the estimators do not adequately distinguish between routine work, such as removal of asbestos Insulation around heating plpes In older homes, and nonroutine work, such as removing belleve that nonroutine work Is far more expensve than routine work and should bear higher customer charges. The estimator sums up his posltion In this way: "My Job Is to measure the area to be cleared of asbestos. As directed by top management, I slmply multiply the square footage by $260 to determine the bld price. Since our average cost Is only $235 per square foot, that leaveseough cushlon to take care of the additional costs of nonroutine work that shows up. Besldes, It Is difficult to know what Is routine or not routine until you actually start tearing things apart Inated celling plaster In Industrial buildings. The on-site supervisors To shed light on this controversy. the company Inlitlated an activlty-based costing study of all of Its costs. Data from the activity-based costing system follow Activity Cost Poo1 Renoving asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs Activity Measure Thousands of square feet Number of jobs Numberof nonroutine fobs 1,669 thousand square feet 588 jobs 109 nonroutine jobs and idle capacity costs) Note: The 189 nonroutine jobs are included in the total of 58e jobs. Both nonroutine jobs and routine jobs require estimating and setup None Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost $ 42,880 737,888 184,888 64,886 338,886 468,886 s 2,897,888 Distribution of Resource Consumption Across Activities Renoving and Job Nonroutine Asbestos OtherTotal Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance 26% 15% 16% 25% 50% 20% 35% % 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. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A to 3C Perform the first-stage allocation of costs to the activity cost pools. Removing and Job Other Total Wages and salaries Disposal fees On-site supplies Office expenses Licensing and insurance Total costExplanation / Answer
Distribution of Resource Connsumption Across Activitie Removing Asbestos Estimating Job Setup Working on non routinne Other Total Wages and Salaries 201000 60300 80400 60300 402000 Diposal Fees 442200 0 294800 0 737000 Equipment Depriciation 52000 10400 15600 26000 104000 OnSuite Supplies 44800 12800 6400 0 64000 Office Supplies 33000 115500 82500 99000 330000 Licencing And Insurance 120000 0 200000 80000 400000 Total 893000 199000 679700 265300 2037000 2 Removing Asbestos 893000/1000 893 Per thousand sq feet Estimating Job Setup 199000/500 398 Per job Working on non routinne 679700/100 6797 Per nonrroutine job 3 Removing Asbestos 893*1 893 Estimating Job Setup 398 for one job 398 Working on non routinne Not applicable Cost per 1000 Sq foot 1291 . Removing Asbestos 893*2 1786 Estimating Job Setup 398 398 Working on non routinne Not applicable 0 Cost per 2000 Sq foot 2184 Cost per 1000 Sq Foot 2184/2 1092 Removing Asbestos 893*2 1786 Estimating Job Setup 398 398 Working on non routinne 6797 Cost per 2000 Sq foot 8981 Cost per 1000 Sq Foot 8981/2 4491