Question

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Pinter Company had the following environmental activities and product information: 1. Environmental activity costs Activity Costs...

Pinter Company had the following environmental activities and product information:

1. Environmental activity costs

Activity Costs
Design products (to reduce pollution) $ 72,000     
Test for contamination 128,000     
Treat toxic waste 400,000     
Operate pollution control equipment 320,000     

2. Driver data

Solvent X Solvent Y
Design hours 1,600           800          
Testing hours 2,800           3,600          
Pounds of waste 300           7,700          
Machine hours 1,600           30,400          

3. Other production data

Solvent X Solvent Y
Nonenvironmental production costs $1,344,000      $1,952,000     
Units produced 160,000      160,000     

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 $162,000 and the cost of toxic waste decreased to $200,000? Assume that Solvent Y uses 1,600 out of 3,200 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 3,800 of 4,000 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 72000/2400 = 30 per design hour
Testing 128000/6400 = 20 per test hour
Treating waste 400000/8000 = 50 per pound of waste
Operating equipment 320000/32000 = 10 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 (to reduce pollution) 48000 24000
Test for contamination 56000 72000
Treat toxic waste 15000 385000
Operate pollution control equipment 16000 304000
Unit environmental cost 135000 785000
Unit cost 135000/160000 = 0.84 785000/160000 = 4.91

3. What if the design costs increased to $162,000 and the cost of toxic waste decreased to $200,000? Assume that Solvent Y uses 1,600 out of 3,200 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 3,800 of 4,000 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 (to reduce pollution) 162000/2400*1600 = 108000
Test for contamination 72000
Treat toxic waste 200000/4000*3800 = 190000
Operate pollution control equipment 304000
Unit environmental cost 674000
Unit cost 4.21

ekkarill92 answered 2 years ago
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