EcoBrite Labs performs tests on water samples supplied by outside companies to e

Question

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. Calculate the total cost of resources supplied, and break this into the cost of activity used and the cost of unused activity.

Explanation / Answer

Resouces Costs Amt $ Lab facility depreciation/year=160000/10=             16,000 Processing Equipment depreciation /year =250000/5=             50,000 Total Annual salary of 6 Lab Rechnicians =           180,000 Chemicals & Supplies             50,000 Total Annual Resource cost           296,000 Annual Tests=           100,000 Resource used per test = $             2.96 Actual Results   Lab facility depreciation/year=160000/10=             16,000 Processing Equipment depreciation /year =250000/5=             50,000 Total Annual salary of 6 Lab Rechnicians =           180,000 Chemicals & Supplies             43,000 (proportional for 86000 tests) Total Annual Resource cost           289,000 Total Resource cost           289,000 No of tests perofrmed               86,000 Cost of Activity used =86000*2.96=           254,560 Cost of unused activity =289000-254560=             34,440

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