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Environmental Cost Assignment

Waurika 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 $4,500,00011,025,000$

Packaging materials $($pounds$)1,125,000450,000$

Energy usage $($kilowatt$-$hours$)225,000270,000$

Toxin releases $($pounds into air$)675,000405,000$

Pollution control $($machine hours$)90,00045,000$

Costs of activities:

Using packaging materials $$1,800,000$

Using energy $540,000$

Releasing toxins $($fines$)135,000$

Operating pollution control equipment $585,000$

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 $fill in the blank $1$

$0\mathrm{.}4456$

Org XY $fill in the blank $2$

$0\mathrm{.}0956$

Which of the two products appears to cause the most degradation to the environment?

Org AB

$2.$ In which environmental category would you classify excessive use of materials and energy?

External failure 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 $$1,125,000$ 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

by $fill in the blank $6$

$0\mathrm{.}001$

Org XY

Increase

by $fill in the blank $8$

$0\mathrm{.}1$