Refer to Problem 14.43. In 2011, Jack Carter, president of Kartel, requested that environmental costs be assigned to the two major products produced by the company. He felt that knowledge of the environmental product costs would help guide the design decisions that would be necessary to improve environmental performance. The products represent two different models of a cellular phone (Model XA2 and Model KZ3). The models use different processes and materials. To assign the costs, the following data were gathered for 2011:

During 2011, Kartel's division produced 200,000 units of Model XA2 and 300,000 units of Model KZ3.
In Problem 14.43
The following environmental cost reports for 2011, 2012, and 2013 (year end December 31) are for the Communications Products Division of Kartel, a telecommunications company. In 2011, Kartel committed itself to a continuous environmental improvement program, which was implemented throughout the company.

At the beginning of 2013, Kartel began a new program of recycling nonhazardous scrap. The effort produced recycling income totaling $25,000. The marketing vice president and the environmental manager estimated that sales revenue had increased by $200,000 per year since 2011 because of an improved public image relative to environmental performance. The company's Finance Department also estimated that Kartel saved $80,000 in 2013 because of reduced finance and insurance costs, all attributable to improved environmental performance. All reductions in environmental costs from 2011 to 2013 are attributable to improvement efforts. Furthermore, any reductions represent ongoing savings.
Required:
1. Using the activity data, calculate the environmental cost per unit for each model. How will this information be useful?
2. Upon examining the cost data produced in Requirement 1, an environmental engineer made the following suggestions:
(1) Substitute a new plastic for a material that appeared to be the source of much of the hazardous waste (the new material actually cost less than the contaminating material it would replace), and
(2) Redesign the processes to reduce the amount of air contaminants produced.
As a result of the first suggestion, by 2013, the amount of hazardous waste produced had diminished to 50 tons, 10 tons for Model XA2 and 40 tons for Model KZ3. The second suggestion reduced the contaminants released by 50 percent by 2013 (15 tons for Model XA2 and 110 tons for Model KZ3). The need for pollution equipment also diminished, and the hours required for operating this equipment for Model XA2 and Model KZ3 were reduced to 60,000 and 200,000, respectively. Calculate the unit cost reductions for the two models associated with the actions and outcomes described (assume the same production as in 2011). Do you think the efforts to reduce the environmental cost per unit were economically justified? Explain.

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Aestioiig Model XA2 Model KZ3 Disposing hazardous waste (tons) Measuring contaminant releases (transactions) Releasing air contaminants (tons) Producing scrap (pounds of scrap) Operating pollution equipment (hours) Designing processes and products (hours) Using energy (BTUs) Training employees (hours) Remediation (labor hours) 20 1,000 25 25,000 120,000 1,500 00,000 50 5,000 180 4,000 225 25,000 400,000 500 1,200,000 50 15,000 Environmental Activitv 2011 2012 2013 Disposing hazardous Measuring contaminant releases Releasing air contaminants Producing scrap (nonhazardous) Operating pollution equipment Designing processes and products Using energy Training employees (environmental) Remediation (clea nup) Inspecting processes S200,000 10,000 500,000 175,000 260,000 50,000 180,000 10,000 400,000 S150,000 100,000 400,000 150,000 200,000 300,000 162,000 20,000 300,000 100,000 S 50,000 70,000 250,000 125,000 130,000 100,000 144,000 40,000 190,000 80,000 wa ste