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 $2.80 to determine the bid price. Because our average cost is only $2.575 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 Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance. Total cost Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Wages and salaries Disposal fees Equipment depreciation On-site supplies $ 372,000 775,000 96,000 Office expenses Licensing and insurance. 58,000 280,000 480,000 $ 2,061,000 Distribution of Resource Consumption Across Activities Estimating Working on Non routine and Job Setup Jobs 10% 20% 0% 40% 10% 20% 40% 0% Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs None Removing Asbestos 60% 60% 50% 70% 10% 25% 15% 10% 20% 60% Other 10% 0% 25% 0% 30% 15% Complete this question by entering your answers in the tabs below. Total Activity 800 thousand square feet 400 jobs 100 nonroutine jobs Total 100% 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. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.

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 $2.80 to determine the bid price. Because our average cost is only $2.575 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 Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance. Total cost Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Wages and salaries Disposal fees Equipment depreciation On-site supplies $ 372,000 775,000 96,000 Office expenses Licensing and insurance. 58,000 280,000 480,000 $ 2,061,000 Distribution of Resource Consumption Across Activities Estimating Working on Non routine and Job Setup Jobs 10% 20% 0% 40% 10% 20% 40% 0% Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs None Removing Asbestos 60% 60% 50% 70% 10% 25% 15% 10% 20% 60% Other 10% 0% 25% 0% 30% 15% Complete this question by entering your answers in the tabs below. Total Activity 800 thousand square feet 400 jobs 100 nonroutine jobs Total 100% 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. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 28E: Environmental costs are those costs incurred because poor environmental quality exists or may exist....

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