- Mercer Asbestos Removal Company Removes Potentially Toxic Asbestos Insulation And Related Products From Buildings There 1 (457.66 KiB) Viewed 11 times
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 $4.20 to determine the bid price. Since our average cost is only $2.90 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 Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) Costs for the Year Wages and salaries. Disposal fees Equipment depreciation. Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. On-site supplies Office expenses Licensing and insurance Total cost $ 431,000 713,000 104,000 63,000 330,000 530,000 $ 2,171,000 Removing Distribution of Resource Consumption Across Activities Wages and salaries Disposal fees #T Equipment depreciation On-site supplies Office expenses Licensing and insurance Asbestos 60% 60% 50% Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs 70% None 10% 20% Estimating Working on and Job Nonroutine Setup 10% Jobs 20% 0% 0% 40% 40% 15% 10 % 25% 50% 10% 10% 20% 35% 0% Other 10% 0% 25% 0% Total Activity 500 thousand square feet 400 jobs 100 nonroutine jobs 30% 30% Total 100% 100% 100% 100% 100% 100% 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. 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.
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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. Estimating and Job Setup Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost Removing asbestos < Req 1 Working on Nonroutine Jobs Req 2 > Other Total
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 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 < Req 1 Req 3A to 3C >
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question by entering your answers in the tabs below. Req 1 Req 2 Req 3A to 3C 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. Total cost of the job Average Cost per thousand square feet Routine 1,000 square feet job < Req 2 Routine 2,000 square feet job Nonroutine 2,000 square feet job Req 3A to 3C Show less A