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Activity-Based Environmental Cost Assignments Pinter Company had the following environmental activities and product information: 1. Environmental...

Activity-Based Environmental Cost Assignments

Pinter Company had the following environmental activities and product information:

1. Environmental activity costs

Activity Costs
Design products (to reduce pollution) $ 129,600     
Test for contamination 230,400     
Treat toxic waste 720,000     
Operate pollution control equipment 576,000     

2. Driver data

Solvent X Solvent Y
Design hours 2,900           2,500          
Testing hours 5,100           9,300          
Pounds of waste 600           17,400          
Machine hours 2,900           69,100          

3. Other production data

Solvent X Solvent Y
Nonenvironmental production costs $1,692,000      $4,068,000     
Units produced 360,000      360,000     

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 $219,600 and the cost of toxic waste decreased to $360,000? Assume that Solvent Y uses 5,000 out of 10,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 6,840 of 7,200 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

Solutions

Expert Solution

1. Calculate the activity rates that will be used to assign environmental costs to products.

Design products $129600/5400 = 24 per design hour
Testing $230400/14400 = 16 per test hour
Treating waste $720000/18000 = 40 per pound of waste
Operating equipment $576000/72000 = 8 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
Design products 69600 60000
Testing 81600 148800
Treating waste 24000 696000
Operating equipment 23200 552800
Total Cost 198400 1457600
Unit environmental cost 360000 360000
Unit cost 0.55 4.05

3. What if the design costs increased to $219,600 and the cost of toxic waste decreased to $360,000? Assume that Solvent Y uses 5,000 out of 10,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 6,840 of 7,200 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.

Activities Solvent Y
Design products 109800
Testing 148800
Treating waste 342000
Operating equipment 552800
Total Cost 1153400
Unit environmental cost 360000
Unit cost 3.20

ekkarill92 answered 2 years ago
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