ds been a long-simmering dispute between th PROBLEM 7-18 Mercer Asbestos Removal Company removes potentialy towic asbestos nsulation and related products from buildinges There has been a long-simmening dspute between the company's estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, uach as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contamisated ceiling plaster in industrial bulidings The on site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges The est mator 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 mutiply 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 difficust to know what is routine or not routine until you actualy start tearing things apart 9 To shed light on this controversy, the company initiated an activity-based costing study of allof its cests. Data from the activity-based costing system follow 10 Activity Measure Thousands of square feet Number of jobs Number of nonroutine jobs None Total Activity 800 thousand square feet Removing asbestos Estimating and job setup working on non,out ine 100 sonroutine jobs Other forganization sustaining couts and idle capacity bots Note: The 100 nnroutine obs are included in the total of 500 pts. Botn ,anroare ebund rout ne m regare etmetit nt setup Cests for the Yer Wages and salanes Disposal fees 700,000 depreciation Office espenses Licensine and insurance Licensing and insurance Total cost 400.000 140000 Working on Distribution of Resource Consumption Across Activities Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total 100 % 100 % 100 % 100 % Removing Asbestos Estimating and lob SetupNonroutinJobs Other 50% 60% 40% 60% 10% 30% 30% 40% 20% 10% 25% 50% 10% 0% 35% 0% 30% 10% 5% 30% 35% 0% 100% 20% 100% uired: erform the first-stoge allocation of costs to the activity cost pools Compute the ectivity rates for the activity cost pools using the activity rates you have computed, determine the totof cost and the overage cost per thousand square eet of each ofth.awngOheccording to the activ, besediosny ys routine 1,000-square foot osbestos removal jo A routine 2,000-square-foot osbestos removol job c. A nonroutine 2,000-square foot asbestos removal job A