activity based cost accounting 274921

Denny Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company’s estimator has been involved in a long simmering dispute with the on site work supervisors. The on site supervisors claim that the estimator does 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 ceiling 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 $4,000 per thousand square feet to determine the bid price. Since our average cost is only $3,000 per thousand square feet, 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 nonroutine until you actually start tearing things apart.”