EcoBrite Labs performs tests on water samples supplied by outside
EcoBrite Labs performs tests on water samples supplied by outside companies to ensure that their waste water meets environmental standards. Customers deliver water samples to the lab and receive the lab reports via the Internet. The EcoBrite Labs facility is built and staffed to handle the processing of 100,000 tests per year. The lab facility cost $160,000 to build and is expected to last 10 years and will have no salvage value. Processing equipment cost $250,000 and has a life expectancy of five years and will have no salvage value. Both facility and equipment are depreciated on a straight-line basis. EcoBrite Labs has six salaried laboratory technicians, each of whom is paid $30,000. In addition to the salaries, facility, and equipment, EcoBrite Labs expects to spend $50,000 for chemicals and other supplies (assuming 100,000 tests are performed). Last year, 86,000 tests were performed.
1. Classify the resources associated with the water testing activity into one of the following types: (1) committed resources and (2) flexible resources.
2. Calculate the total annual activity rate for the water testing activity. Break the activity rate into fixed and variable components.
3. Compute the total activity availability, and break this into activity output and unused activity.
4. Calculate the total cost of resources supplied, and break this into the cost of activity used and the cost of unused activity.
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