Question

Refer to the data in Problem. At the end of the year, the following data are available on actual operations at the landfill.
Volume of trash . . . . . . . . . . . . . . . . . . . . . . 1,250 tons (400 loads)
Preparation costs (per load) . . . . . . . . . . . . $72,000
Other variable costs (per ton) . . . . . . . . . . . 52,500
Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . 148,000
Total budgeted costs . . . . . . . . . . . . . . . . $272,000
In Problem, Mathes Corporation manufactures paper products. The company operates a landfill, which it uses to dispose of nonhazardous trash. The trash is hauled from the two nearby manufacturing facilities in trucks that can carry up to five tons of trash in a load. The landfill operation requires certain preparation activities regardless of the amount of trash in a truck (i.e., for each load). The budget for the landfill for next year follows:
Volume of trash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 tons (300 loads)
Preparation costs (varies by loads). . . . . . . . . . . . . . . $60,000
Other variable costs (varies by tons) . . . . . . . . . . . . . 60,000
Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Total budgeted costs . . . . . . . . . . . . . . . . . . . . . . . . $270,000
Mathes is considering making the landfill a profit center and charging the manufacturing plants for disposing of the trash. The landfill has sufficient capacity to operate for at least the next 20 years. Other landfills are available in the area (both private and municipal), and each plant would be free to decide which landfill to use.

Required
Based on the actual activities and costs, would you change the recommendation you made in Problem? Why or why not?



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  • CreatedJanuary 07, 2014
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