Vance 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 non-routine 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 metres by $4,000 per thousand square metres to determine the bid price. Since our average cost is only $3,000 per thousand square metres, that leaves enough cushion to take care of the additional costs of non-routine 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 ABC study of all of its costs. Data from the ABC system follow:

Removing Estimating Working on Asbestos and Job Non-routine Other Totals Setup Jobs Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total costActivity Cost Pool Activity Rate Removing asbestos per thousand square metres Estimating and job setup per job Working on non-routine jobs per non-routine jobTotal cost of the job Average cost per thousand square metres\fActivity Cost Pool Activity Measure Total Activity Removing asbestos Thousands of square metres 500,000 m2 Estimating and job setup Number of jobs 280 jobs* Working on non-routine jobs Number of non-routine jobs 25 non-routine jobs Other (costs of idle capacity and Not applicable; these organization-sustaining costs are costs) not allocated to jobs.Wages and salaries $ 200,000 Disposal fees 600,000 Equipment depreciation 80,000 On-site supplies 60,000 Office expenses 190,000 Licensing and nsurance 370,000 Total cost $1,500,000Distribution of Resource Consumption across Activity Cost Pools Working on Estimating Non- Removing and Job routine Asbestos Setup Jobs Other Total Wages and 30% 15% salaries 45% 10% 100% Disposal fees 70% 0% 30% 0% 100% Equipment depreciation 40% 0% 35% 25% 100% On-site supplies 55% 15% 25% 5% 100% Office expenses 10% 40% 35% 15% 100% Licensing and 50% 0% 40% 10% 100% insurance