50.1K

Verified Solution

Link Copied!

one question with multiple parts.

Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company's estimator has been involved in a long-simmering dispute with the on-site work supervisors. The on-site supervisors claim that the estimator does not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and non-routine work, such as removing asbestos contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that non-routine 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 metres by $4,900 per thousand square metres to determine the bid price. Since our average cost is only $3,900 per thousand square metres, that leaves enough cushion to take care of the additional costs of non-routine 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 ABC study of all of its costs. Data from the ABC system follow: Activity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square metres 500,000.2 Estimating and job setup Number of jobs 250 jobs Working on non-routine jobs Number of non-routine jobs 27 non-routine jobs Other (costs of idle capacity and Not applicable; these costs are not organization-sustaining costs) allocated The total number of jobs includes non-routine jobs as well as routine jobs. Non-routine jobs as well as routine jobs require estimating and setup work. Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost $ 290,000 735,000 107,000 78,000 262,000 478,000 $1,950,000 Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Distribution of Resource Consumption across Activity Cost Pools Removing Estimating and Working on Non- Asbestos Job Setup routine Jobs Other 404 109 35% 15% 75 09 254 09 45% 0% 409 15% 50 15% 259 109 10% 40% 309 209 50 @9 45% 59 Total 1005 100% 1009 100% 100% 1004 Required: 1. Perform the first stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a o wherever it is required.) Removing Asbestos Estimating and Job Setup Working on Non- routine Jobs Other Totals $ 0 0 0 Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost 0 0 0 $ 0 $ 0 $ $ 0 $ 0 2. Compute the activity rates for the activity cost pools, (Round your answers to 2 decimal places.) Activity Cost Pool Removing asbestos Estimating and job setup Working on non-routine jobs Activity Rato per thousand square metres per job per non-routine job 3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square metres of each of the following jobs according to the ABC system: a. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Average cost par thousand square metres b. A routine 4,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres c. A non-routine 2,000 square metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Cost per thousand square metres

Answer & Explanation Solved by verified expert

See Answer