ch5_hw_qa2_part3_br Mercer Asbestos Removal Company removes potentlally toxic asbestos Insulation and related products from buildings. There hasbeen a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim that theestimators do not adequately distingulsh between routine work, such as removal of asbestos Insulation around heating pipes in olderhomes, and nonroutine work, such as removing asbestos-contaminated celling plaster in Industrial bulldings. The on-site supervisorsbelieve that nonroutine work Is far more expensive than routine work and should bear higher customer charges. The estimator sumsup his position in this way: "My Job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiplythe square footage by $2.50 to determine the bid price. Since our average cost is only $2.155 per square foot, that leaves enoughcushion to take care of the addltional costs of nonroutine work that shows up. Besides, It is difficult to know what is routine or notroutine until you actually start tearing things apart."To shed light on this controversy, the company Initlated an activity-based costing study of all of Its costs. Data from the activity-basedcosting system follow:Total ActivityActivity Cost PoolRemoving asbestosEstimating and job setupWorking on nonroutine jobsOther (organization-sustaining costsand idle capacity costs)Note: The 1ee nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routinejobs require estimating and setup.Activity MeasureThousands of square feetNumber of jobsNumber of nonroutine jobs1, e00 thousand square feet400 jobs100 nonroutine jobsNoneCosts for the YearWages and salariesDisposal feesEquipment depreciationOn-site supplies328, 000706, 00e9e, e0053,000230,000Office expensesLicensing and insurance430,e00Total cost$ 1,837, 000Distribution of Resource Consumption Across ActivitiesEstimatingWorking onRemovingand JobNonroutineAsbestosSetup10%JobsOtherTotalWages and salariesDisposal feesEquipment depreciationOn-site suppliesOffice expenses60%20%10%10ex60%40%1ee%40%5%20%35%100%70%20%10%10e%10%35%25%30%100%Licensing and insurance35%50%15%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 thefollowing 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. Req 1Reg 2Req 3A to 3CUsing the activity rates you have computed, determine the total cost and the average cost per thousand square feet of eachof the following jobs according to the activity-based costing system. (Round the "Average Cost per thousand square feet" to 2decimal 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.Show lessaRoutineRoutineNonroutine1,000 sq. ft.job2,000 sq. ft.job2,000 sq. ft.jobTotal cost of the jobAverage Cost per thousand square feet

>There are various methods to allocate the overhead support costs that are not directly related…

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 clalm that the estimators do not adequately distingulsh between routlne work, such as removal of asbestos Insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated celling plaster in industrial bulldings. 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 $2.50 to determine the bid price. SIınce our average cost is only $2155 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 untl you actually start tearing things apart." To shed light on this controversy, the company initlated 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) Note: The 180 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine Activity Measure Total Activity Thousands of square feet Number of jobs Number of nonroutine jobs 1, eee thousand square feet 400 jobs 100 nonroutine jobs None jobs require estimating and setup. Costs for the Year wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 328, ee0 706, eee 90, eee 53,eee 238, ৪ee 430, e0e $ 1,837, eee Licensing and insurance Total cost Distribution of Resource Consumption Across Activities Estimating working on Nonroutine Removing and Job Asbestos Setup Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 60% 1e% 20% 18% 10ex 60% 40% ex 1eex 40% 5% 20% 35% 1e0% 70% 20% 1eex ex 30% 1ex 25% sex 10% 35% 100% Licensing and insurance 35% ex 15% 10ex 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.