Homework Help is Here – Start Your Trial Now!
Business
Accounting
1. Perform the first stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.) 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 Other Totals 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

1. Perform the first stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.) 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 Other Totals 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter2: Job Order Costing
Section: Chapter Questions
Problem 3PA: Job cost sheet Remnant Carpet Company sells and installs commercial carpeting for office buildings....
See similar textbooks
icon
Related questions
icon
Concept explainers
Topic Video
Question
Problem 7-20 Activity-Based Costing and Bidding on Jobs [LO2, LO3] 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 $4,500 per thousand square metres to determine the bid price. Since our average cost is only $3,500 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 Removing asbestos Estimating and job setup Working on non-routine jobs Other (costs of idle capacity and organization-sustaining costs) Wages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance Total cost Wages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance *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 Activity Cost Pool Removing asbestos Estimating and job setup Working on non-routine jobs Activity Measure Thousands of square metres Number of jobs Number of non-routine jobs Not applicable; these costs are not allocated to jobs. $ 250,000 675,000 95,000 70,000 Removing Asbestos 230,000 430,000 $1,750,000 Total cost of the job Cost per thousand square metres Removing Asbestos 458 70% 40% Total cost of the job Cost per thousand square metres 558 10% 50% Job Setup 10% Distribution of Resource Consumption across Activity Cost Pools Estimating and Working on Non- routine Jobs 08 08 Estimating and Job Setup 158 40% 08 30% 30% 35% 500,000 m2 300 jobs 25% 35% 40% Total Activity 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.) 25 non-routine jobs Working on Non- Other routine Jobs Activity Rate per thousand square metres per job per non-routine job Other 158 08 04 25% 58 158 10% 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Total 100% 100% 100% Totals 100% 100% 100% 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 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Average cost per thousand square metres b. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) c. A non-routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)
Transcribed Image Text:Problem 7-20 Activity-Based Costing and Bidding on Jobs [LO2, LO3] 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 $4,500 per thousand square metres to determine the bid price. Since our average cost is only $3,500 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 Removing asbestos Estimating and job setup Working on non-routine jobs Other (costs of idle capacity and organization-sustaining costs) Wages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance Total cost Wages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance *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 Activity Cost Pool Removing asbestos Estimating and job setup Working on non-routine jobs Activity Measure Thousands of square metres Number of jobs Number of non-routine jobs Not applicable; these costs are not allocated to jobs. $ 250,000 675,000 95,000 70,000 Removing Asbestos 230,000 430,000 $1,750,000 Total cost of the job Cost per thousand square metres Removing Asbestos 458 70% 40% Total cost of the job Cost per thousand square metres 558 10% 50% Job Setup 10% Distribution of Resource Consumption across Activity Cost Pools Estimating and Working on Non- routine Jobs 08 08 Estimating and Job Setup 158 40% 08 30% 30% 35% 500,000 m2 300 jobs 25% 35% 40% Total Activity 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.) 25 non-routine jobs Working on Non- Other routine Jobs Activity Rate per thousand square metres per job per non-routine job Other 158 08 04 25% 58 158 10% 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Total 100% 100% 100% Totals 100% 100% 100% 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 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) Total cost of the job Average cost per thousand square metres b. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.) c. A non-routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)
Expert Solution
steps

Step by step

Solved in 5 steps with 6 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Costing Systems
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial & Managerial Accounting
Financial & Managerial Accounting
Accounting
ISBN:
9781285866307
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Principles of Cost Accounting
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS