Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-standing simmering dispute between the company's appraiser and the work supervisors. On-site supervisors say the estimators do not adequately distinguish between routine work, such as removing asbestos insulation around heating pipes in older homes, and non-routine work, such as removing asbestos-contaminated ceiling plaster in buildings industrial. On-site supervisors believe that non-routine work is much more expensive than routine work and must pay higher charges from customers. The appraiser summarizes his position this way: “My job is to measure the area to be cleaned of asbestos. As instructed by senior management, I simply multiply the square footage by $2.80 to determine the offer price. Since our average cost is only $2.30 per square foot, that leaves enough margin to cover the additional costs of non-routine work that shows up. Plus, it's hard to know what's routine or non-routine until you really start tearing things apart."

To shed light on this controversy, the company initiated an activity-based costing study of all its costs. The data of the activity-based costing system are as follows:

Activity Cost Pool	activity measure	total activity
asbestos removal	Thousands of square feet	800	thousand square feet
Job Estimation and Setup	number of jobs	400	jobs
Working non-routine jobs	Number of non-routine jobs	100	non-routine jobs
Others (costs of idle capacity and costs of maintenance of the organization)	None

Note: The 100 non-routine jobs are included in the total of 400 jobs. Both non-routine jobs and routine jobs require estimation and setup.

costs of the year
Wages and salaries	ps	332,000
removal fees		740.000
equipment depreciation		90.000
On-site supplies		54.000
Office expenses		240.000
Licenses and insurance		440.000
Total cost	ps	1,896,000

Distribution of resource consumption between activities

	asbestos removal		Job Estimation and Setup		Work non-routine jobs		Other		Total
Wages and salaries	50	%	10	%	30	%	10	%	100	%
removal fees	70	%	0	%	30	%	0	%	100	%
equipment depreciation	40	%	5	%	20	%	35	%	100	%
On-site supplies	60	%	25	%	15	%	0	%	100	%
Office expenses	10	%	40	%	15	%	35	%	100	%
Licenses and insurance	25	%	0	%	60	%	15	%	100	%

Required:

1.	Perform first-stage cost allocation to activity cost pools.

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

3.	Using the activity rates you have calculated, determine the total cost and the average cost per thousand square feet for each of the following jobs under the activity-based costing system. (Round "Average Cost" to 2 decimal places.)

Answer rating: 100% (QA)

1 Perform firststage cost allocation to activity cost pools To allocate costs to the activity cost pools we need to use the distribution of resource c... View the full answer