Question

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 Activity Measure Total Activity Removing asbestos Thousands of square feet 800 thousand square feet Estimating and job setup Number of jobs 500 jobs Working on nonroutine jobs Number of nonroutine jobs 100 nonroutine jobs Other (organization-sustaining costs and idle capacity costs) None Note: The 100 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 Licensing and insurance Total cost $ 300,000 700,000 90,000 50,000 200.000 400,000 $ 1,740,000 Distribution of Resource Consumption across Activities Estimating Working on Removing and Job Nonroutine Asbestos Setup Jobs Wages and salaries 100 30 Disposal fees 608 408 Equipment depreciation 408 208 108 On-site supplies office expenses 108 356 258 500 Licensing and insurance 508 Other 10 08 356 Total 1000 1008 1000 1000 1000 1000 608 30% 08 308 200 308 06

how to calculate ？

Answer 1

Solution 1:

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	$300,000.00	50%	$150,000.00	10%	$30,000.00	30%	$90,000.00	10%	$30,000.00
Disposal Fees	$700,000.00	60%	$420,000.00	0%	$0.00	40%	$280,000.00	0%	$0.00
Equipment depreciation	$90,000.00	40%	$36,000.00	5%	$4,500.00	20%	$18,000.00	35%	$31,500.00
On Site Supplies	$50,000.00	60%	$30,000.00	30%	$15,000.00	10%	$5,000.00	0%	$0.00
Office Expenses	$200,000.00	10%	$20,000.00	35%	$70,000.00	25%	$50,000.00	30%	$60,000.00
Licensing and Insurance	$400,000.00	30%	$120,000.00	0%	$0.00	50%	$200,000.00	20%	$80,000.00
Total	$1,740,000.00		$776,000.00		$119,500.00		$643,000.00		$201,500.00

Solution 2:

Determination of activity rate for each activity
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate
					Removing Asbestos	$776,000.00	Thousand of Square Feet	800	$970.00
Estimating and Job Setup	$119,500.00	Number of Jobs	500	$239.00
Working on non routine job	$643,000.00	Number of non routine jobs	100	$6,430.00
Other	$201,500.00	No allocation

Solution 3a:

Computation of total cost and average cost per thousand square feet - Routine 1000 Square feet job
Particulars	Amount
Removing Asbestos	$970.00
Estimating and Job Setup	$239.00
Total cost of job	$1,209.00
Average cost per thousand square feet	$1,209.00

Solution 3b:

Computation of total cost and average cost per thousand square feet - Routine 2000 Square Foot job
Particulars	Amount
Removing Asbestos	$1,940.00
Estimating and Job Setup	$239.00
Total cost of job	$2,179.00
Average cost per thousand square feet	$1,089.50

Solution 3c:

Computation of total cost and average cost per thousand square feet - Non routine 2000 Square foot job
Particulars	Amount
Removing Asbestos	$1,940.00
Estimating and Job Setup	$239.00
Working on non routine job	$6,430.00
Total cost of job	$8,609.00
Average cost per thousand square feet	$4,304.50