Environmental Costing - Problem Assignment

The following information about the production division of Dade Production Co. was obtained from the accounting records:

Cost Item

Amount

Salaries and fringe benefits - workers

$900,000

Manager's salary

65,000

Raw material and supplies

215,000

Machinery rental

150,000

Facilities' costs (space, desk, computer, etc.)

140,000

RCRA fine

90,000

Consultant's fee

45,000

TOTAL

$1,605,000

Further analysis revealed the following:

a. The department employs 30 skilled workers with average salary and benefits of $30,000 each and a manager with a salary and benefits of $65,000.

b. The department requires 30 hours of training per worker each year in hazardous materials handling and record-keeping procedures.

c. One of the workers spends 2/3 of her time interacting with warehouse personnel to advise and document appropriate handling of hazardous materials upon receipt. The rest of her time is spent in production.

d. The department is expected to produce 3,000 finished items this year.

e. There are nine steps in the production process. Two of these involve hazardous materials, and each of these steps takes 6 times as long to complete the other steps.

f. The department manager estimates that 30 percent of his time is spent interacting with risk-management personnel, studying regulations and solving problems workers encounter in working with hazardous materials.

g. Last year the company was fined $90,000 because a hazardous material was stored improperly.

h. The use of hazardous materials requires approximately the same supplies and materials as do non-hazardous materials.

i. Facilities' costs and machinery rental will be assigned to hazardous materials based on the percent of workers' salaries associated with handling hazardous materials to total salaries cost.

J. During the past year the department hired an outside research and development consultant to study ways in which environmentally benign materials could replace hazardous materials.

Requirements:

1. Separate costs into environmental and non-environmental costs.

2. Categorize environmental costs into the four types of costs.

3. Display the information visually to highlight key elements (HINT: appropriate graphic).

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