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 $3.10 to determine the bid price.Since our average cost is only $2.85 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 feet800 thousand squarefeet Estimating and job setup Number of jobs 500jobs Working on nonroutine jobs Number of nonroutine jobs 100nonroutine jobs Other (costs of idle capacity andorganization-sustaining costs) None Note: The 100 nonroutine jobsare included in the total of 500 jobs. Both nonroutine jobs androutine jobs require estimating and setup. Costs for the Year Wagesand salaries $ 450,000 Disposal fees 820,000 Equipment depreciation110,000 On-site supplies 65,000 Office expenses 350,000 Licensingand insurance 550,000 Total cost $ 2,345,000 Distribution ofResource Consumption Across Activities Removing Asbestos Estimatingand Job Setup Working on Nonroutine Jobs Other Total Wages andsalaries 60 % 10 % 20 % 10 % 100 % Disposal fees 60 % 0 % 40 % 0 %100 % Equipment depreciation 40 % 5 % 25 % 30 % 100 % On-sitesupplies 70 % 20 % 10 % 0 % 100 % Office expenses 10 % 40 % 15 % 35% 100 % Licensing and insurance 25 % 0 % 60 % 15 % 100 % Required:1. Perform the first-stage allocation of costs to the activity costpools. 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 decimal places.) a. A routine1,000-square-foot asbestos removal job. b. A routine2,000-square-foot asbestos removal job. c. A nonroutine2,000-square-foot asbestos removal job.