Question

Environmental Cost Report Verde Company reported operating costs of $43,000,000 as of December 31, 20x5, with the following environmental costs: Testing for contamination $ 989,000 Inspecting products 430,000 Treating toxic waste 1,548,000 Obtaining ISO 14001 certification 731,000 Designing processes 688,000 Cleaning up oil spills 2,967,000 Maintaining pollution equipment 1,118,000 Cleaning up contaminated soil 5,160,000 Required: 1. Prepare an environmental cost report, classifying costs by quality category and expressing each as a percentage of total operating costs. Round percentages to two decimal places, if rounding is required. For example, 5.79% would be entered as "5.79" Verde Company Environmental Cost Report For the Year Ended December 31, 20x5 Environmental Cost Total Environmental Cost Percentage of Operating Costs Prevention costs: Cleaning up contaminated soil Cleaning up oil spills Inspecting products % Detection costs: Maintaining pollution equipment Obtaining ISO 14001 certification Designing processes % Testing for contamination Internal failure costs: Treating toxic waste % External failure costs: % % Total quality costs 2. What if Verde deliberately did not include the cost of damaging the ecosystem because of solid waste disposal in its environmental cost report? What is the most likely reason? The costs are inconsequential and are therefore immaterial. The costs are social costs and formal recognition is not required. The statement users have no interest in this cost.

Answer 1

The following is the answer for the above question:

Verde Company Enviornmental Cost Report For the year ended December 31, 20x5 Enviornmental Cost Total Enviornmental Cost Persentage of Operating cost 43000000 731000 688000 1419000 3.30 % 989000 430000 1419000 3.30 % Prevention Cost: Obtaining ISO 14001 Certification Designing Process Detection Cost: Testing for Contamination Inspecting Products Internal Failure Cost: Maintaining Pollution Equipment Testing Toxic Waste External Failure Cost: Cleaning Up Oil Spills Cleaning up Contaminated Soil Total Quality Costs 1118000 1548000 2666000 6.20 % 2967000 5160000 8127000 18.90 % 31.70 % 13631000 2.These are social costs and formal recognition is not required.