You are given the following environmental quality-related costs:
Employee training …………………………….. $100,000
Product design ………………………………… 140,000
Supplier certification ………………………….. 40,000
Process inspection …………………………….. 320,000
Depreciation—pollution-control equipment ….. 400,000
Maintaining pollution-control equipment …….. 200,000
Cleaning up polluted lake ……………………... 500,000
Restoring land after use ……………………….. 700,000
Property damage claim ………………………… 600,000

Required
1. Prepare a cost of environmental quality report for the year. Determine subtotals for each of the four reporting categories and express each subtotal as a percentage of total operating expenses ($10,000,000) for the year.
2. Based on the report you prepare, what conclusions can you draw regarding the company’s environmental quality performance for the year?
3. Can you offer management suggestions for the design of an effective cost of environmental quality reporting system? (That is, what would make for a good reporting system?)

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April 18, 2013

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