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?)