Activity Measure Thousands of sq Activity Activity Cost Pool Removing asbestos J

Question

Activity Measure Thousands of sq Activity Activity Cost Pool Removing asbestos Job setup 500 #Of jobs 200 25 Non-routine jobs Other Total Costs $200,000 Disposal Fees Equip. depreciation On-site supplies Office expenses Licensing and insurance $80,000 $60,000 $190,000 Total Costs $1,500,000 Cost Distribution acrosS activities Non- Removing asbestos Job setup jobs Total 100% 100% 100% 100% 100% 100% 10% 35% Other 15% Wages/Salaries Disposal Fees Equip. depreciation On-site supplies Office expenses Licensing and insurance 1096 10% 20% 10% 55% 10% 15% Directions: Perform the first-stage allocation of costs to the activity cost pools. Compute the activity rates for the activity cost pools. Using the activity rates determine the total cost of each of the following jobs according to ABC. All jobs involve the following activities: job setup and asbestos removal. Non-routine jobs have an additional non- 1. 2. 3. activity cost Rouine 2,000 square foot asbestos removal (Hint multiply by 2) a. b. c. Routine 4,000 square foot asbestos removal Non-Routine 2,000 square foot asbestos removal The company currently makes a standard bid of $4,000 per thousand square feet for all jobs. Discuss whether the company should continue to make this standard bid for all jobs and the implications. How does ABC enhance the company's ability to price the service? Describe how one would compute the margin for the service. 4. 5. 6.

Explanation / Answer

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Solution 2:

Solution 3a:

Solution 3b:

Solution 3c:

Solution 4:

Company should not continue to make standard bid of $4,000 square feet for all job as cost of non routine job is much higher than bid price while cost of routine job is profitable at the standard bid. Therefore company should made different bids for routine job and non routine job considering cost per thousand square feet against each job separately.

Note: I have answered first 4 parts of the question as per chegg policy, kindly post separate question for answer of remaining parts.

First stage allocation of cost to activity cost pools Particulars Total Cost Removing Asbestos Estimating and Job Setup Working on non routine job Others % Amount % Amount % Amount % Amount Wages & Salaries $200,000.00 40% $80,000.00 10% $20,000.00 35% $70,000.00 15% $30,000.00 Disposal Fees $600,000.00 70% $420,000.00 0% $0.00 30% $180,000.00 0% $0.00 Equipment depreciation $80,000.00 50% $40,000.00 0% $0.00 40% $32,000.00 10% $8,000.00 On Site Supplies $60,000.00 55% $33,000.00 15% $9,000.00 20% $12,000.00 10% $6,000.00 Office Expenses $190,000.00 10% $19,000.00 40% $76,000.00 30% $57,000.00 20% $38,000.00 Licensing and Insurance $370,000.00 50% $185,000.00 0% $0.00 40% $148,000.00 10% $37,000.00 Total $1,500,000.00 $777,000.00 $105,000.00 $499,000.00 $119,000.00

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