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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 companys 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, I simply multiply the square footage by $3.00 to determine the bid price. Since our average cost is only $2.68 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

	Activity Measure	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

Wages and salaries	$	414,000
Disposal fees		808,000
Equipment depreciation		94,000
On-site supplies		61,000
Office expenses		310,000
Licensing and insurance		510,000
Total cost	$	2,197,000

Please show steps if you can! :)

Distribution of Resource Consumption Across Activities Estimating Working on and Job Setup 1096 0% 10% 20% 35% 0% Nonroutine Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Removing Asbestos 50% 70% 50% 70% 1096 25% Jobs 30% 30% 15% 10% 25% 6096 Other 10% 0% 25% 0% 30% 15% Total 100% 100% 100% 100% 100% 100% Required 1. Perform the first-stage allocation of costs to the activity cost pools Estimating Working on Removing and Nonroutine Jobs Other Total Asbestos Job Setup Wages and salaries Disposal fees Equipment depreciation On-site supplies Office expenses Licensing and insurance Total cost 2. Compute the activity rates for the activity cost pools Activity Rate Activity Cost Pool Removing asbestos Estimating and job setup Working on nonroutine jobs per thousand square feet per job per nonroutine job

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