Question

Environmental Cost Assignment Coyle Pharmaceuticals produces two organic chemicals (Org AB and Org XY) used in the production of two of its most wide-selling anti-cancer drugs. The controller and environmental manager have identified the following environmental activities and costs associated with the two products: Org AB Org XY Pounds produced 3,150,000 8,925,000 Packaging materials (pounds) 875,000 350,000 175,000 210,000 Energy usage (kilowatt-hours) Toxin releases (pounds into air) Pollution control (machine hours) 525,000 175,000 175,000 35,000 Costs of activities: Using packaging materials $1,750,000 Using energy 210,000 Releasing toxins (fines) 105,000 Operating pollution control equipment 420,000 Required: 1. Calculate the environmental cost per pound for each product. Round your calculations and answers to four decimal places. Unit Cost Per Pound Org AB Org AB Org XY Org XY Detection cost Which of the two products appears to cause the most degradation to the environment? External failure cost Internal failure cost 2. In which environmental category would you classify excessive use of materials and energy? Prevention cost 3. Suppose that the toxin releases cause health problems for those who live near the chemical plant. The costs, due to missed work and medical treatments, are estimated at $980,000 per year. How would assignment of these costs change the unit cost? Round your calculations and answers to three decimal places. Unit Cost Org AB INCREASE/DECREASE by $ INCREASE/DECREASE Org XY by $

Answer 1

fx 4 A B с D E F G 1 2 Org AB Org XY Total 3 4 1 Activity Pool Packaging Material Energy Usage Toxin Releases Pollution Control 875,000 175,000 525,000 175,000 350,000 210,000 175,000 35,000 1,225,000 385,000 700,000 210,000 5 6 7 8 Cost Activity Rate 9 Activity Pool Packaging Material Energy Usage Toxin Releases Pollution Control 10 Activity Level 1,225,000 385,000 700,000 210,000 1 1 1,750,000 210,000 105,000 420,000 11 0 2 12 13 14 Activity Rate 15 16 17 Activity Pool Packaging Material Energy Usage Toxin Releases Pollution Control Total Pounds produced Cost per pound 1.4286 0.5455 0.1500 2.0000 Org AB 875,000 175,000 525,000 175,000 18 Allocated Cost to Org AB 1,250,025 95,463 78,750 350,000 1,774,238 3,150,000 0.5633 Org XY 350,000 210,000 175,000 35,000 Allocated Cost to Org XY 500,010 114,555 26,250 70,000 710,815 8,925,000 0.0796 19 20 21 22 23 24 25 26 Org AB Org XY Unit Cost per pound 0.5633 0.0796 27 28 Org AB cause the most degradation to the environment. 29 30 2 External Failure Cost 31 32 33 3 Increase in toxin release co! Total pounds in air Increase in rate 980000 700000 1.400 34 35 36 Org AB Increase by Org XY Increase by 0.233 0.027 37 38 39 40