Question

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 Activity Measure Total Activity Removing asbestos Thousands of square feet 5e0 thousand square feet Estimating and job setup Number of jobs 400 jobs Working on non routine jobs Number of non routine jobs 100 nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 non routine jobs are included in the total of 400 jobs. Both non routine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries Disposal fees Equipment depreciation 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 Asbestos Other 101 GON 60 50 Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Estimating working on and Job Nonroutine Setup Jobs 10 es 405 100 154 201 105 355 256 505 Total 100 100 100s 100 1009 100 256 en 305 301 TON ON Required:

Answer 1

As 1 is correct I have done the remaining parts.

2) Activity rate= Total cost/Total activity

Removing asbestos= $921500/500= $1843 per thousand square feet

Estimated and job setup= $181600/400= $454 per job

Working on nonroutine jobs= $740800/100= $7408 per nonrountine job

3-a) A routine 1000-square-foot-asbestos removal job

Removing asbestos (1*$1843)	$1843
Estimated and job setup (1*$454)	454
Working on nonroutine jobs	0
Total cost of the job	$2297
Average cost per thousand square feer ($2297/1)	$2297

b) A routine 2000-square-foot-asbestos removal job

Removing asbestos (2*$1843)	$3686
Estimated and job setup (1*$454)	454
Working on nonroutine jobs	0
Total cost of the job	$4140
Average cost per thousand square feer ($4140/2)	$2070

c) A non-routine 2000-square-foot-asbestos removal job

Removing asbestos (2*$1843)	$3686
Estimated and job setup (1*$454)	454
Working on nonroutine jobs (1*$7408)	7408
Total cost of the job	$11548
Average cost per thousand square feer ($11548/2)	$5774