html ? a Search Help Save & Exit Submit 10 Problem 7-18 Activity-Based Costing a

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html ? a Search Help Save & Exit Submit 10 Problem 7-18 Activity-Based Costing and Bidding on Jobs [LO7-2, Lo7-3, LO7-4] 10 points g dispute between the company's estimator and the work supervisors. The on-site supervisors claim that the been a long-simmering estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and 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 th be cleared of asbestos. As directed by top management, I simply multiply the square footage by $3.20 to determine the bid price. Since our average cost is only $2.745 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 until you actually start tearing things apart." ine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site 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 800 thousand square feet 500 jobs 100 of jobs Estimating and job setup Working on nonroutine jobs other (organization-sustaining costs Number of nonroutine jobs nonroutine jobs and idle capacity costs) Note: The 100 nonroutine Jobs are included in the total ot s00 jobs. Both nonroutine jobs and 470,000 K Prev 18 of 18E Next >

Explanation / Answer

Since, multiple questions have been posted, I have answered the first one (all parts).

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Part 1)

The first stage allocation to costs to cost activity pools is done as below:

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Part 2)

The activity rate for each activity cost pool is calculated as below:

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Part 3)

a)

The total cost and average cost per thousand square feet is calculated as below:

Total Cost of Routine 1,000 Square-Foot Asbestos Removal Job = 1,333 + 446 = $1,779

Average Cost of Routine 1,000 Square-Foot Asbestos Removal Job = 1,779/1 = $1,779

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b)

Total Cost of Routine 2,000 Square-Foot Asbestos Removal Job = 1,333*2 + 446 = $3,112

Average Cost of Routine 2,000 Square-Foot Asbestos Removal Job = 3,112/2 = $1,556

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c)

Total Cost of Nonroutine 2,000 Square-Foot Asbestos Removal Job = 1,333*2 + 446 + 7,816 = $10,928

Average Cost of Nonroutine 2,000 Square-Foot Asbestos Removal Job = 10,928/2 = 10,928/2 = $5,464

First-Stage Allocations to Activity Cost Pools Removing Asbestos Estimating and Job Setup Working on Nonroutine Jobs Other Total Wages and salaries 282,000 (470,000*60%) 47,000 (470,000*10%) 94,000 (470,000*20%) 47,000 (470,000*10%) 470,000 Disposal fees 480,600 (801,000*60%) 0 (801,000*0%) 320,400 (801,000*40%) 0 (801,000*0%) 801,000 Equipment depreciation 55,000 (110,000*50%) 11000 (110,000*10%) 16,500 (110,000*15%) 27500 (110,000*25%) 110,000 On-site supplies 40,800 (68,000*60%) 17,000 (68,000*25%) 10,200 (68,000*15%) 0 (68,000*0%) 68,000 Office expenses 37,000 (370,000*10%) 148,000 (370,000*40%) 55,500 (370,000*15%) 129,500 (370,000*35%) 370,000 Licensing and insurance 171,000 (570,000*30%) 0 (570,000*0%) 285,000 (570,000*50%) 114,000 (570,000*20%) 570,000 Total Cost $1,066,400 $223,000 $781,600 $318,000 $2,389,000

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