Chapter 6 Homework nstrictions help 10.00 points Mercer Asbestos Removal Company removes potentially 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 romoving asbestos contaminated coiling 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 $2.50 to determine the bid price. Since our average cost is only $2.175 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." 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 Removing asbestos Estimating and job setup Working on nonroutine jobs Othor (costs of idle capacity and Activity Measure Total Activity Thousands of square foot Number of jobs Number of nonroutine jobs 800 thousand squarefeet 500 jobs 100 nonroutine jobs 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 S 300,000 700,000 90,000 50.000 200.000 400.000 Distribution of Resource Consumption Across Activities Removing Estimating andWorking on Asbostos Job Setup Nonroutine Jobs Other Total Wages and salaries Disposal fees 50% 10% 100% 0% On-site supplies Ottice expenses Licensing and insurance 30% 35% 0% 30% 20% 100% 100% 10% 25% 1. Perform the first-stage allocation of costs to the activity cost pools. EstimatingWorking on Removing Estimating Job SetupNonroutine Other Total Wages and salaries Disposal fees Equipment depreciation On-site supplies Oftice expenses Licensing and insurance Total cost 2. Compute the activity raes for the activity cost pools