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 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 $2.80 to determine the bid price. Since our average cost is only $2.315 per square foot, that leaves enough cushlon 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 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-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 1ee nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Activity Measure Total Activity Thousands of square feet Number of jobs 800 thousand square feet 500 jobs Number of nonroutine jobs 190 nonroutine jobs None Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies 360, 000 765, eee 98,000 57,00e Office expenses 270, 000 Licensing and insurance 470, eee Total cost $ 2,820,000 Distribution of Resource Consumption Across Activities Estimating working on Removing and Job Nonroutine Asbestos Setup Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 50% 10% 30% 10% 10ex 70% 30% 100% 40% 5% 20% 35% 1ee% 60% 30% 10% 100% 15% 35% 20% 30% 10e% Licensing and insurance 30% 50% 20% 10ex Required: 1. Perform the first-stage allocatlon 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. Complete this question by entering your answers in the tabs below.

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 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 $2.80 to determine the bid price. Since our average cost is only $2.315 per square foot, that leaves enough cushlon 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 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-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 1ee nonroutine jobs are included in the total of 500 jobs. Both nonroutine jobs and routine jobs require estimating and setup. Activity Measure Total Activity Thousands of square feet Number of jobs 800 thousand square feet 500 jobs Number of nonroutine jobs 190 nonroutine jobs None Costs for the Year Wages and salaries Disposal fees Equipment depreciation On-site supplies 360, 000 765, eee 98,000 57,00e Office expenses 270, 000 Licensing and insurance 470, eee Total cost $ 2,820,000 Distribution of Resource Consumption Across Activities Estimating working on Removing and Job Nonroutine Asbestos Setup Jobs Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses 50% 10% 30% 10% 10ex 70% 30% 100% 40% 5% 20% 35% 1ee% 60% 30% 10% 100% 15% 35% 20% 30% 10e% Licensing and insurance 30% 50% 20% 10ex Required: 1. Perform the first-stage allocatlon 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. Complete this question by entering your answers in the tabs below.

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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