Billing Chemical produces a number of chemical products, two of which are a dyestuff intermediate and an

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Billing Chemical produces a number of chemical products, two of which are a dyestuff intermediate and an adhesive for rubber. The controller and environmen- tal manager have identified the following environmental activities and costs associ- ated with the two products.

Dyestuff Intermediate Rubber Adhesive Pounds produced 2,000,000 5,000,000 Packaging materials (pounds) 600,000 300,000 Energy usage (kilowatt hours) 200,000 100,000 Toxin releases (pounds into air) 500,000 100,000 Pollution control (machine hours) 80,000 20,000 Costs of activities:

Using packaging materials $900,000 Using energy 240,000 Releasing toxins (fines) 120,000 Operating pollution control equipment 280,000 Required:
1. Calculate the environmental cost per pound for each product. Which of the two appears to cause the most degradation to the environment?
2. In which environmental category would you classify excessive use of materials and energy?
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 $540,000 per year. How would assignment of these costs change the unit cost? Should they be assigned?

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Management Accounting

ISBN: 9780324002263

5th Edition

Authors: Don R Hansen, Maryanne M Mowen

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