Carbondioxide Chemical produces a number of chemical products, two of which are Product A1 and Product A2. The controller and environmental manager have identified the following environmental activities and costs associated with the two products: $\begin{array}{lrr}&\text { Froduct } A 1& \text { Product } A2\
\text { Pounds produced } & 200,000 & 500,000 \
\text { Packaging materials (pounds) } & 60,000 & 30,000 \
\text { Energy usage (kilowatt hours) } & 20,000 & 10,000 \
\text { Toxic releases (pounds into air) } & 50,000 & 10,000 \
\text { Pollution control (machine hours) } & 8,000 & 2,000\\
\text { Costs of activities: } & \
\text { Using packaging materials } & \$ 90,000 \
\text { Using energy } & 24,000 \
\text { Releasing toxins (fines) } & 12,000 \
\text { Operating pollution control equipment } & 28,000\
\end{array}$ What is the energy usage cost per unit of Product A2?

Question

Quizplus · Accepted Answer

The total cost for using energy is $24,000, and Product A2 uses 10,000 kilowatt hours. Therefore, the cost per kilowatt hour is $24,000 / 10,000 = $2.40. Since Product A2 uses 10,000 kilowatt hours, the cost per unit of Product A2 is $24,000 / 500,000 units = $0.048 per unit. However, this calculation distributes the total energy cost across both products, not just A2. The correct approach is to find the cost per kilowatt hour and then apply it to the energy usage of Product A2. The mistake in the explanation indicates a misunderstanding of how to allocate the costs correctly. The correct calculation for the energy usage cost per unit of Product A2 should consider the proportion of energy used by A2 in relation to the total energy cost, not the direct division of total cost by the number of units produced.

Carbondioxide Chemical Produces a Number of Chemical Products, Two of Which