Question

1. Environmental activity costs Costs Activity Design products (to reduce pollution) Test for contamination Treat toxic waste Operate pollution control equipment $ 239,400 425,600 1,330,000 1,064,000 2. Driver data Solvent Y Design hours Testing hours Pounds of waste Machine hours Solvent X 5,300 9,500 1,100 5,300 6,100 20,900 36,900 146,700 3. Other production data Solvent X Solvent Y Nonenvironmental production costs Units produced $6,460,000 760,000 $12,084,000 760,000 Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. Design products per design hour Testing per test hour Treating waste per pound of waste Operating equipment per machine hour 2. Determine the unit environmental and unit costs of each product using ABC. If required, round your answers to the nearest cent. Activities Solvent X Solvent Y Unit environmental cost $ Unit cost $ 3. What if the design costs increased to $329,400 and the cost of toxic waste decreased to $665,000? Assume that Solvent Y uses 12,200 out of 24,400 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 12,635 of 13,300 pounds of toxic waste. What is the new environmental cost for Solvent Y? If required, round your intermediate calculations and answer to the nearest cent. per unit

Answer 1

1)	Activity Rates
			Costs	Activities			Rates
	Design products		$   2,39,400.00	11400	(5300 + 6100)		$   21.00
	Testing		$   4,25,600.00	30400	(9500 + 20900)		$   14.00
	Treating waste		$ 13,30,000.00	38000	(1100 + 36900)		$   35.00
	Operating equipment		$ 10,64,000.00	152000	(5300 + 146700)		$      7.00

2)	Particulars			Solvent X	Solvent Y
	Environmental costs
	Design products			$ 1,11,300.00	$   1,28,100.00
	Testing			$ 1,33,000.00	$   2,92,600.00
	Treating waste			$    38,500.00	$ 12,91,500.00
	Operating equipment			$    37,100.00	$ 10,26,900.00
	Total environmental cost			$ 3,19,900.00	$ 27,39,100.00
	Units produced			760000	760000
(a)	Unit environmental cost			$              0.42	$                3.60
	Non- Environmental costs			6460000	12084000
	Units produced			760000	760000
	Unit non- environmental cost			$              8.50	$              15.90
(b)	Unit cost			$              8.92	$              19.50

3)	Particulars			Solvent Y
	Environmental costs
	Design products			$   1,64,700.00
	Testing			$   2,92,600.00
	Treating waste			$   6,31,750.00
	Operating equipment			$ 10,26,900.00
	Total environmental cost			$ 21,15,950.00
	Units produced			760000
				$                2.78