Question

A company who produces two different products, Product X and Product Y, Is busy to evaluate the activity-based environmental cost of each product

The following Is Information on two of the environmental activities

Activity	Driver	Cost R
Maintenance of pollution equipment	Maintenance hours	120,000
Disposal of toxic waste	Kilograms of waste	80,000

The following data Is available for Product X and Product Y

	Product X	Product Y
Non-environmental production costs	R400,000	R500,000
Number of units produced	100,000	200,000
Maintenance hours for pollution equipment	1,000	4,000
Toxic waste In Kilograms            •	10,000	30,000

3 1         Assign the environmental activity costs to Product X and to Product Y                                       (2)

32. Calculate the unit environmental cost of Product X                                                                  (2)

33. Calculate the unit environmental cost of Product Y                                                                  (2)

34. Calculate the overall unit cost of Product X                                                                              (2)

35. Calculate the overall unit cost of Product Y                                                                              (2)

Answer 1

Activity	Driver	Cost R	Total Level of activity	Activity rate per Driver	calculation
Maintenance of pollution equipment	Maintenance hours	120000	5000 [10000+4000]	24	120000/5000
Disposal of toxic waste	Kilograms of waste	80000	40000 [10000+30000]	2	80000/40000

Assignment of the environmental activity costs to Product X and to Product Y
S.No		Product X Amount in R	Product Y Amount in R
(a)	Maintenance hours	1000	4000
(b)	Activity rate per Driver	$                 24	$                 24
(c )	Maintenance of pollution equipment [(a)*(b)]	$        24,000	$        96,000
(d)	Kilograms of waste	10000	30000
(e )	Activity rate per Driver	$                   2	$                   2
(f)	Disposal of toxic waste [(d)*( e)]	$        20,000	$        60,000
(g)	Total environmental costs allocated to Product X and Y [(c ) + (f)]	$        44,000	$      156,000

Unit environmental cost of Product X and to Product Y
S.No		Product X Amount in R	Product Y Amount in R
(a)	Total environmental costs allocated to Product X and Y [(c ) + (f)]	44000.00	156000.00
(b)	Number of Units	100000	200000
(c )	Unit environmental cost [(a)/(b)]	0.44	0.78

Calculation of overall unit cost of Product X and to Product Y
S.No		Product X Amount in R	Product Y Amount in R
(a)	Total environmental costs allocated to Product X and Y [(c ) + (f)]	44,000.00	156,000.00
(b)	Non-environmental production costs	400,000.00	500,000.00
(c )	Total Cost [(a) + (b)]	444,000.00	656,000.00
(d)	Number of Units	100000	200000
(e )	Overall Unit cost [(c )/(d)]	4.44	3.28