Question

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 Activity Measure Total Activity Removing asbestos Thousands of square feet 800 thousand square feet Estimating and job setup Number of jobs 400 jobs Working on nonroutine jobs Number of nonroutine jobs 100 nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup.

Please note that each box with a dropdown must be filled.

Answer 1

Requirement 1 37,200.00 - 24,000.00 Wages and Salaries Disposal Fees Equipment Depreciation On site supplies Office expenses Licensing and Insurance Total Cost Removing asbestos Estimating and job setup Working on non routine jobs Others $ 223,200.00 $ 37,200.00 $ 74,400.00 $ $ 465,000.00 $ 310,000.00 $ 48,000.00 $ 9,600.00 $ 14,400.00 $ 40,600.00 $ 11,600.00 5,800.00 $ $ 28,000.00 $ 112,000.00 $ 56,000.00 $ 120,000.00 $ 288,000.00 $ $ 924,800.00 $ 170,400.00 $ 748,600.00 $ Total $ 372,000.00 $ 775,000.00 $ 96,000.00 $ 58,000.00 $ 280,000.00 $ 480,000.00 $ 2,061,000.00 84,000.00 72,000.00 217,200.00 Requirement 2 Total Activity (B) Activity Cost pool Removing asbestos Estimating and job setup Working on non routine jobs Total Cost (A) $ 924,800.00 $ 170,400.00 $ 748,600.00 800 $ 400 $ 100 $ Activity Rate (A/B) 1,156.00 Per Thousand Square feet 426.00 Per Job 7,486.00 Per Non Routine Job Requirement 3 $ 1,156.00 426.00 (a) Routine 1000 square foot asbestos removal Job Removing Asbestos ($1156 per thousand sq foot) Estimating and job setup ($426*1 job) Non routine Job (NA) Total Cost of Job Avg Cost per Thousand square feet $ $ $ 1,582.00 1,582.00 2,312.00 426.00 $ (b) Routine 2000 square foot asbestos removal Job Removing Asbestos ($1156 per thousand sq foot*2) Estimating and job setup ($426*1 job) Non routine Job (NA) Total Cost of Job Avg Cost per Thousand square feet = $2738 / 2 thousand sqaure feet) $ $ 2,738.00 1,369.00 (C) Non-Routine 2000 square foot asbestos removal Job Removing Asbestos ($1156 per thousand sq foot*2) Estimating and job setup ($426*1 job) Non routine Job Total Cost of Job Avg Cost per Thousand square feet = $10224 / 2 thousand Sqaure feet) 2,312.00 426.00 7,486.00 10,224.00 5.112.00 $ $