A Company Was Evaluating the Activity-Based Environmental Cost of Two

question 92

Essay

A company was evaluating the activity-based environmental cost of two different products: Product ABC and Product XYZ.Information on two environmental activities is as follows: $$\begin{array} { l l r } \text { Activity } & \text { Driver } & \text { Cost } \\\text { Maintaining pollution equipment } & \text { Maintenance hours } & \$ 120,000 \\\text { Toxic waste disposal } & \text { Kilograms of waste } & 80,000\end{array}$$ Data on Product X and Product Y follows: $\begin{array}{lrr}&\text { Product } \mathrm{ABC}& \text { Product } \mathrm{XYZ}\\\text { Production costs (non-environmental) } & \$ 400,000 & \$ 500,000 \\\text { Units produced } & 100,000 & 200,000 \\\text { Maintenance hours for pollution equipment } & 1,000 & 4,000 \\\text { Pounds of toxic waste } & 10,000 & 30,000\end{array}$ A. Assign the environmental activity costs to Froduct $\mathrm{ABC}$ and to Froduct $\mathrm{XYZ}$ .
B. Calculate the unit environmental cost of Froduct $A B C$ .
C. Calculate the unit environmental cost of Froduct XYZ.
D. Calculate the overall unit cost of Product ABC.
E. Calculate the overall unit cost of Product XYZ.

---

Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Production Capacity

The maximum amount of goods or services that a facility can produce over a given time period under normal operating conditions.

Sales Mix

The proportion of different products or services that make up the total sales of a company.

Limited Production

A production strategy where a restricted quantity of a product is made, often to maintain exclusivity or because of constraints.