Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmeringdispute between the company's estimator and the work supervisors. The on-site supervisors claim the estimators do not adequatelydistinguish between routine work, such as removing 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 nonroutine work is formore expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: "My job isto measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $3.20 todetermine the bid price. Because our average cost is only $2.805 per square foot, that leaves enough cushion to take care of theadditional costs of nonroutine work. Besides, it is difficult to know what is routine or not routine until you actually start tearing thingsapart."To shed light on this controversy, the company gathered the following activity-based costing data:Activity Cost PoolRemoving asbestosEstimating and job setupWorking on nonroutine jobsOther (organization-sustaining costs and idlecapacity costs)Costs for the YearWages and salariesDisposal feesEquipment depreciationNote: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating andsetup.On-site suppliesoffice expensesLicensing and insuranceTotal costWages and salariesDisposal feesEquipment depreciationOn-site suppliesoffice expensesLicensing and insurance$ 440,000824,000188,00064,888348,000540,000$ 2,316,000Distribution of Resource Consumption Across ActivitiesEstimating Working onand JobNonroutineJobsRequired 1 Required 2RemovingAsbestos58%78%48%60%15%38%Required 3A to3CSetup18%Activity MeasureThousands of square feetNumber of jobsNumber of nonroutine jobsNoneex5%38%35%8Compute the activity rates for the activity cost pools.Activity Cost PoolRemoving asbestosEstimating and job setupWorking on nonroutine jobs< Required 1Activity Rateper thousand square feetper jobper nonroutine job30%30%20%10%20%68%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. Calculate the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-basedcosting 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.Complete this question by entering your answers in the tabs below.Other10%e%35%8%30%10%Total Activity850 thousand square feet400 jobs100 nonroutine jobsTotal100%100%100%100%100%100%Required 3A to 3C > Required 3A to3CRequired 1 Required 2Calculate the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.Note: Round the "Average Cost per thousand square feet" to 2 decimal 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.Total cost of the jobAverage Cost per thousand square feetRoutine 1,000square feet jobRoutine 2,000square feet jobNonroutinesquare2,000feet jobShow less A

Under activity based costing method, the cost is allocated to each activity based on its…

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim the estimators do not adequately distinguish between routine work, such as removing 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 nonroutine work is for 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 $3.20 to determine the bid price. Because our average cost is only $2.805 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work. 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 gathered the following activity-based costing data: Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) Costs for the Year Mages and salaries Disposal fees Equipment depreciation Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. On-site supplies office expenses Licensing and insurance Total cost $ 448,888 824,000 188,000 64,888 340,000 548,888 $ 2,316,000 Mages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance Distribution of Resource Consumption Across Activities Estimating Working on and Job Removing Asbestos 58% 78% 48% 68% 15% Setup 18% Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs None S% 38% 35% Nonroutine Jobs b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. 38% 30% 28% 18% 28% 68% Other 18% 35% 38% 10% Total 188% Total Activity 850 thousand square feet 480 jobs 100 nonroutine jobs 100% 100% 100% 100% 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. Calculate 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.

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering dispute between the company's estimator and the work supervisors. The on-site supervisors claim the estimators do not adequately distinguish between routine work, such as removing 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 nonroutine work is for 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 $3.20 to determine the bid price. Because our average cost is only $2.805 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work. 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 gathered the following activity-based costing data: Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) Costs for the Year Mages and salaries Disposal fees Equipment depreciation Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. On-site supplies office expenses Licensing and insurance Total cost $ 448,888 824,000 188,000 64,888 340,000 548,888 $ 2,316,000 Mages and salaries Disposal fees Equipment depreciation On-site supplies office expenses Licensing and insurance Distribution of Resource Consumption Across Activities Estimating Working on and Job Removing Asbestos 58% 78% 48% 68% 15% Setup 18% Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs None S% 38% 35% Nonroutine Jobs b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job. 38% 30% 28% 18% 28% 68% Other 18% 35% 38% 10% Total 188% Total Activity 850 thousand square feet 480 jobs 100 nonroutine jobs 100% 100% 100% 100% 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. Calculate 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.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 92DC

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