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Mercer Asbestos Removal Company removes potentially toxicasbestos insulation and related products from buildings. There hasbeen a long-simmering dispute between the company’s estimator andthe work supervisors. The on-site supervisors claim that theestimators do not adequately distinguish between routine work suchas removal of asbestos insulation around heating pipes in olderhomes and nonroutine work such as removing asbestos-contaminatedceiling plaster in industrial buildings. The on-site supervisorsbelieve that nonroutine work is far more expensive than routinework and should bear higher customer charges. The estimator sums uphis position in this way: “My job is to measure the area to becleared of asbestos. As directed by top management, I simplymultiply the square footage by $3.20 to determine the bid price.Since our average cost is only $2.81 per square foot, that leavesenough cushion to take care of the additional costs of nonroutinework that shows up. Besides, it is difficult to know what isroutine or not routine until you actually start tearing thingsapart.”

To shed light on this controversy, the company initiated anactivity-based costing study of all of its costs. Data from theactivity-based costing system follow:

Activity Cost Pool	ActivityMeasure	Total Activity
Removing asbestos	Thousands of square feet		850		thousand squarefeet
Estimating and job setup	Number of jobs		400		jobs
Working on nonroutine jobs	Number of nonroutine jobs		100		nonroutine jobs
Other (costs of idle capacityand organization-sustaining costs)	None

Note: The 100 nonroutine jobs are included in the total of 400jobs. Both nonroutine jobs and routine jobs require estimating andsetup.

Costs for the Year
Wages and salaries	$	440,000
Disposal fees		824,000
Equipmentdepreciation		108,000
On-site supplies		64,000
Office expenses		340,000
Licensing and insurance		540,000
Total cost	$	2,316,000

Distribution of Resource Consumption Across Activities

	Removing Asbestos				Estimating and Job Setup				Working on Nonroutine Jobs				Other				Total
Wages and salaries		50	%			10	%			30	%			10	%				100	%
Disposal fees		70	%			0	%			30	%			0	%				100	%
Equipment depreciation		40	%			5	%			20	%			35	%				100	%
On-site supplies		60	%			30	%			10	%			0	%				100	%
Office expenses		15	%			35	%			20	%			30	%				100	%
Licensing and insurance		30	%			0	%			60	%			10	%				100	%

Required:

1. Perform the first-stage allocation of costs to the activitycost pools.

2. Compute the activity rates for the activity cost pools.

3. Using the activity rates you have computed, determine the totalcost and the average cost per thousand square feet of each of thefollowing jobs according to the activity-based costing system.(Round the "Average cost" to 2 decimalplaces.)

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 removaljob.