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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 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, l 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 Measure Activity Cost Poo 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 (costs of idle capacity and organization-sustaining 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 300,000 Wages and salaries 700,000 Disposal fees Equipment depreciation 90,000 On-site supplies 50,000 200,000 Office expenses Licensing and insurance 00.000 Total cost $1,740,000 Distribution of Resource Consumption Across Activities Estimating Working on Removing and Job Nonroutine Setup Other Asbestos Jobs Total 50% 10% 30% 10% 100% Wages and salaries 60% 0% 40% 0% 100% Disposal fees Equipment depreciation 40% 5% 20% 35% 100% On-site supplies 60% 30% 10% 0% 100% Office expenses 10% 35% 25% 30% 100% Licensing and insurance 30% 0% 50% 20% 100%