Part B: Sustainability and Business Value

The following questions relate to Gluck Metal Works.

a. Gluck Metal Works stamps sheet metal into blanks that are used in a variety of consumer products. The average cost for sheet metal is $100 per ton. Gluck's waste disposal company charges $55 per ton to dispose of manufacturing waste. The stamping process currently employed by Gluck generates an average of 120 tons of waste per month.

What is the annual cost of stamping waste, including both the materials cost and the disposal cost?

A.$223,200

B.$18,600

C.$144,000

D.$79,200

b. Gluck Metal Works stamps sheet metal into blanks that are used in a variety of consumer products. The average cost for sheet metal is $85 per ton. Gluck's waste disposal company charges $65 per ton to dispose of manufacturing waste. The stamping process currently employed by Gluck generates an average of 150 tons of waste per month.

What is the net amount Gluck would save per year if stamping waste could be sold to a recycler for $33 per ton?

A.$12,750

B.$117,000

C.$176,400

D.$59,400

c. Gluck Metal Works stamps sheet metal into blanks that are used in a variety of consumer products. The average cost for sheet metal is $80 per ton. Gluck's waste disposal company charges $70 per ton to dispose of manufacturing waste. The stamping process currently employed by Gluck generates an average of 170 tons of waste per month.

Gluck has developed a new system that would increase the efficiency of its stamping process. The new system has an annual cost of $50,000, but would reduce stamping waste by 50%, the remaining waste would be sold to a recycler for $35 per ton. What is the net savings if Gluck implements this new system?

A.$210,100

B.$260,100

C.$142,800

D.$35,700

Part C: Calculating Costs

Serenity Now Industries manufactures custom fiberglass hulls for luxury yachts and pleasure boats. The current cost accounting system uses machine hours to allocate manufacturing overhead to each job. Serenity estimates that in the coming year it will incur $600,000 in manufacturing overhead costs and use 8,000 machine hours.

Depending on the specifications requested by the customer, the hull may use hazardous chemicals that incur greater disposal costs. Serenity's traditional accounting system includes the cost of hazardous waste disposal in with total manufacturing overhead. Serenity is planning to implement an activity based costing system to more accurately assign hazardous waste disposal costs to each job.

Expected usage and costs for manufacturing overhead are as follows:

During the year, Yacht #633 was started and completed:

DM cost per lb.

$55

Lbs. of DM used on job

170

DL cost per hr.

$20.00

DLH used

50

Requirements:

a.Calculate the cost of Yacht #633 using the Serenity's current method of allocating manufacturing overhead.

b.Calculate the cost of Yacht #633 using the proposed activity based costing system. How is this information useful to an environmental management accounting (EMA) system?