ch5_hw_qa2_part3_sh 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 clalm that theestimators do not adequately distinguish between routine work, such as removal of asbestos Insulation around heating pipes in olderhomes, and nonroutine work, such as removing asbestos-contaminated celing plaster in Industrial bulldings. The on-site supervisorsbeleve 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 $2.80 to determine the bid price. Since our average cost is only $2.315 per square foot, that leaves enoughcushion to take care of the additional costs of nonroutine work that shows up. Besides, It is difficult to know what is routine or notroutine until you actually start tearing things apart."To shed light on this controversy, the company Initlated an activity-based costing study of all of Its costs. Data from the activity-basedcosting system follow:Activity Cost PoolRemoving asbestosEstimating and job setupWorking on nonroutine jobsOther (organization-sustaining costsand idle capacity costs)Note: The 1ee nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routinejobs require estimating and setup.Activity MeasureTotal ActivityThousands of square feetNumber of jobs800 thousand square feet500 jobs100 nonroutine jobsNumber of nonroutine jobsNoneCosts for the YearWages and salariesDisposal feesEquipment depreciationOn-site supplies360, 000765, e0098,00057, 000270, e0047e, eeeOffice expensesLicensing and insuranceTotal cost$ 2,020,000Distribution of Resource Consumption Across ActivitiesEstimatingand JobWorking onRemovingNonroutineAsbestosSetupJobsOtherTotalWages and salariesDisposal feesEquipment depreciationOn-site suppliesOffice expenses50%10%30%10%10ex70%30%100%40%5%20%35%100%60%30%10%10e%15%35%20%30%10e%Licensing and insurance30%50%20%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.Complete this question by entering your answers in the tabs below. Complete this question by entering your answers in the tabs below.Req 1Req 2Reg 3A to 30Using 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 1,00o0-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 less aNonroutine2,000 sq. ft.jobRoutineRoutine1,000 sq. ft. 2,000 sq. ft.jobjobTotal 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 potentlally 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 claim that the estimators do not adequately distinguish between routine 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 buildings. 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 $280 to determine the bid price. Since our average cost is only $2.315 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 Initiated 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 Activity Measure Total Activity Thousands of square feet Number of jobs Number of nonroutine jobs 80e thousand square feet see jobs 100 nonroutine jobs Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 180 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 360, eee 765, eee 98,eee 57,90e 278, 00e 470, e0e Licensing and insurance Total cost $ 2,820,eee Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Nonroutine Asbestos Setup 10% Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 50% 30% 10% 1ee% 70% 30% 1eex 40% 5% 20% 35% 1eex 60% 30% 35% ex 10% e% 1ee% 15% 20% 30% 10ex Licensing and insurance 30% 5e% 20% 1ee% 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.

Mercer Asbestos Removal Company removes potentlally 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 claim that the estimators do not adequately distinguish between routine 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 buildings. 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 $280 to determine the bid price. Since our average cost is only $2.315 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 Initiated 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 Activity Measure Total Activity Thousands of square feet Number of jobs Number of nonroutine jobs 80e thousand square feet see jobs 100 nonroutine jobs Working on nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 180 nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 360, eee 765, eee 98,eee 57,90e 278, 00e 470, e0e Licensing and insurance Total cost $ 2,820,eee Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Nonroutine Asbestos Setup 10% Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 50% 30% 10% 1ee% 70% 30% 1eex 40% 5% 20% 35% 1eex 60% 30% 35% ex 10% e% 1ee% 15% 20% 30% 10ex Licensing and insurance 30% 5e% 20% 1ee% 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.

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

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter16: Tax Research

Section: Chapter Questions

Problem 57DNC

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