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	7,500,000		17,250,000
Packaging materials (pounds)	4,470,000		2,280,000
Energy usage (kilowatt-hours)	1,500,000		750,000
Toxin releases (pounds into air)	3,750,000		750,000
Pollution control (machine hours)	600,000		150,000
Costs of activities:
Using packaging materials		$6,750,000
Using energy		1,800,000
Releasing toxins (fines)		900,000
Operating pollution control equipment		2,100,000

Required:

1. Calculate the environmental cost per pound for each product. Round your answers to the nearest cent.

	Unit Cost Per Pound
Org AB	$fill in the blank 1
Org XY	$fill in the blank 2

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

Org ABOrg XYOrg AB

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

Detection costExternal failure costInternal failure costPrevention costExternal 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 $4,050,000 per year. How would assignment of these costs change the unit cost? Round your answers to the nearest cent.

		Unit Cost
Org AB	DecreaseIncreaseIncrease by	$fill in the blank 6
Org XY	DecreaseIncreaseIncrease by	$fill in the blank 8