Mercer Asbestos Removal Company removes potentially toxic asbestos insulation from buildings. There has been a long-simmering dispute between the companys estimator and the work supervisors. The on-site supervisors claim the estimators do not adequately distinguish between routine work, such as removing 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 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 $3.60 to determine the bid price. Because our average cost is only $2.775 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work. 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 gathered the following activity-based costing data:

Activity Cost Pool	Activity Measure	Total Activity
Removing asbestos	Thousands of square feet	800	thousand square feet
Estimating and job setup	Number of jobs	400	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 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup.

Costs for the Year
Wages and salaries	$ 480,000
Disposal fees	882,000
Equipment depreciation	108,000
On-site supplies	68,000
Office expenses	380,000
Licensing and insurance	580,000
Total cost	$ 2,498,000

Distribution of Resource Consumption Across Activities
	Removing Asbestos	Estimating and Job Setup	Working on Nonroutine Jobs	Other	Total
Wages and salaries	50%	15%	20%	15%	100%
Disposal fees	70%	0%	30%	0%	100%
Equipment depreciation	40%	5%	20%	35%	100%
On-site supplies	70%	20%	10%	0%	100%
Office expenses	15%	35%	20%	30%	100%
Licensing and insurance	30%	0%	50%	20%	100%

Required:

1. Perform the first-stage allocation of costs to the activity cost pools.
2. Compute the activity rates for the activity cost pools.
3. Calculate the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.
   1. A routine 1,000-square-foot asbestos removal job.
   2. A routine 2,000-square-foot asbestos removal job.
   3. A nonroutine 2,000-square-foot asbestos removal job.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3A to 3C

Perform the first-stage allocation of costs to the activity cost pools.

Perform the first-stage allocation of costs to the activity cost pools.

	Removing asbestos	Estimating and Job Setup	Working on Nonroutine Jobs	Other	Total
Wages and salaries
Disposal fees
Equipment depreciation
On-site supplies
Office expenses
Licensing and insurance
Total cost

2Compute the activity rates for the activity cost pools.

Activity Cost Pool	Activity Rate
Removing asbestos		per thousand square feet
Estimating and job setup		per job
Working on nonroutine jobs		per nonroutine job

Calculate the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.

Note: Round the "Average Cost per thousand square feet" to 2 decimal places.

a. A routine 1,000-square-foot asbestos removal job. b. A routine 2,000-square-foot asbestos removal job. c. A nonroutine 2,000-square-foot asbestos removal job.

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	Routine 1,000 square feet job	Routine 2,000 square feet job	Nonroutine 2,000 square feet job
Total cost of the job
Average Cost per thousand square feet