Exercise 14.23 (Algorithmic) Environmental Cost Assignment

Coyle Pharmaceuticals produces two organic chemicals (Org AB and Org XY) used in the production of two of its most wide-selling anti-cancer drugs. The controller and environmental manager have identified the following environmental activities and costs associated with the two products:

	Org AB		Org XY
Pounds produced	8,500,000		20,825,000
Packaging materials (pounds)	2,125,000		1,275,000
Energy usage (kilowatt-hours)	425,000		425,000
Toxin releases (pounds into air)	1,700,000		595,000
Pollution control (machine hours)	510,000		85,000
Costs of activities:
Using packaging materials		$3,400,000
Using energy		510,000
Releasing toxins (fines)		255,000
Operating pollution control equipment		1,105,000

Required:

1. Calculate the environmental cost per pound for each product. Round your calculations and answers to four decimal places.

	Unit Cost Per Pound
Org AB	$
Org XY	$

Which of the two products appears to cause the most degradation to the environment?

2. In which environmental category would you classify excessive use of materials and energy?

3. Suppose that the toxin releases cause health problems for those who live near the chemical plant. The costs, due to missed work and medical treatments, are estimated at $2,210,000 per year. How would assignment of these costs change the unit cost? Round your calculations and answers to three decimal places.

		Unit Cost
Org AB		$
Org XY		$