Problem $7-20$ Activity$-$Based Costing and Bidding on Jobs $[$LO$2,$ LO$3]$

Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from bulldings. 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 celling plaster in industrial bulldings. The on$-$site supervisors belleve that non$-$routine 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 $$4,200$ per thousand square metres to determine the bid price. Since our average cost is only $$3,200$ per thousand square metres, that leaves enough cushlon 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 untll 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:

$\backslash$table$[[$Activity cost Pool,Activity Measure,Total Activity$],[$Removing asbestos,Thousands of square metres,$500,000m^2$