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:

Cost Pool description:Machine maintance costs - Cost Pool: $200,000 Cost driver: Number of machine hours: Cost driver 8,000 Cost pool rate: $25.00

Cost Pool description: Engeneering change orders - Cost Pool: $100,00 Cost driver: Number of change orders: Cost driver: 1,250.00 Cost pool rate: $80.00

Cost Pool description: Hazerdous waste disposal - Cost Pool: $300,000 Cost driver: Gallons of hazard waste generated: Cost driver usage: $800 Cost pool: $375.00

Cost Pool: $600,000

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?

Cost Pool description:Machine maintance costs - Cost Pool: $200,000 Cost driver: Number of machine hours: Cost driver 8,000 Cost pool rate: $25.00

Cost Pool description: Engeneering change orders - Cost Pool: $100,00 Cost driver: Number of change orders: Cost driver: 1,250.00 Cost pool rate: $80.00

Cost Pool description: Hazerdous waste disposal - Cost Pool: $300,000 Cost driver: Gallons of hazard waste generated: Cost driver usage: $800 Cost pool: $375.00

Cost Pool: $600,000