3108021 management accounting hansen mowen ch12

7/30/2019 3108021 Management Accounting Hansen Mowen CH12

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Environment

Cost

Management

CHAPTER


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1. Discuss the importance of measuring

environment costs.

2. Explain how environmental costs are

assigned to products and processes.

3. Describe the life-cycle cost assessment

model.

4. Compare and contrast activity- and strategic-

based environmental control.

Objectives

After studying this

chapter, you should

be able to:


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Ecoefficiency essentially

maintains that organizations

can produce more usefulgoods and services while

simultaneously reducing

negative environmental

impacts, resourceconsumption, and costs.

The Benefits of Ecoefficiency


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Incentives and causes for increased

efficiency:1) Customers are

demanding products

that areenvironmental

friendly


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Incentives and causes for increased

efficiency:1) Customers are

demanding products

that areenvironmental

friendly2) Employees prefer to

work forenvironmentally

respective firms


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Causes andIncentives for

Ecoefficiency


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For Cleaner Products

Cost Reduction and

Competitive

Advantage

Lower Cost of

Capital and LowerInsurance

Innovations and

New Opportunities

Better Employees

and Greater

Productivity

ECOEFFICENCY

Significant Special Benefits

Leading to Improved Image


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Environmental Quality

Cost ModelEnvironmental costs are costs that are incurred

because poor environmental quality exists or may

exist.Environmental costs can be classified in four

categories: prevention costs, detection costs, internal

failure costs, and external failure costs.


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Evaluating and selecting suppliers

Evaluating and selecting pollution control equipment

Designing processes

Designing products

Carrying out environmental studies

Auditing environmental risksDeveloping environmental management systems

Recycling products

Obtaining ISO 14001 certification

Classification of Environmental

Costs by Activity

Prevention Activities


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Costs by Activity

Auditing environmental activities

Inspecting products and processes

Developing environmental performance measures

Testing for contamination

Verifying supplier environmental performance

Measuring contamination levels

Detection Activities


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Costs by Activity

Operating pollution control equipment

Treating and disposing of toxic waste

Maintaining pollution equipment

Licensing facilities for producing contaminants

Recycle scrap

Internal Failure Activities


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Costs by Activity

Cleaning up a polluted lake

Cleaning up oil spills

Cleaning up contaminated soil

Settling personal injury claims (environmentally related)

Restoring land to natural state

Losing sales due to poor environmental reputationUsing materials and energy inefficiently

Receiving medical care due to polluted air (S)

Losing employment because of contamination (S)

External Failure Activities


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Numade Corporation

Environmental Cost Report

For the Year Ended December 31, 2004Percentage of

Environmental Costs Operating Costs

Prevention costs:

Training employees $ 60,000Designing products 180,000

Selecting equipment 40,000 $280,000 1.40%

Detection costs:

Inspecting processes $240,000

Developing measures 80,000 320,000 1.60

Continued


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Internal failure costs:

Operating pollution

equipment $400,000

Maintaining pollution

equipment 200,000 $ 600,000 3.00%

External failure costs:

Cleaning up lake $900,000

Restoring land 500,000

Incurring propertydamage claim 400,000 1,800,000 9.00

Totals $3,000,000 15.00%

Percentage of

Environmental Costs Operating Costs


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Environmental benefits:

Cost reductions, contaminants $ 300,000

Cost reductions, hazardous waste disposal 400,000Recycling income 200,000

Energy conservation cost savings 100,000

Packaging cost reductions 150,000Total environmental benefits $1,150,000

Numade Corporation

Environmental Financial Statement

For the Year Ended December 31, 2004

Continued


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Numade Corporation

Environmental Financial Statement

For the Year Ended December 31, 2004Environmental costs:

Prevention costs $ 280,000

Detection costs 320,000Internal failure costs 600,000

External failure costs 100,000

Packaging cost reductions 1,800,000Total environmental costs $1,150,000


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Environment Product Costs

The environmental costs of

processes that produce,

market, and deliver products

and the environmentalpostpurchase costs caused by

the use and disposal of the

products are examples of

environmental product costs.


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Full environmental

costing is the

assignment of allenvironmental costs,

both private and

societal, to products.


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Full private

costing is theassignment of

only private cost

to individual

products.

Private costing is probably a good starting pointfor many firms.

Private costs can be assigned using data created

inside the firm.


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Evaluate and select suppliers $0.20 $ 0.05

Design processes (to reduce pollution) 0.10 0.10

Inspect processes (for pollution problems) 0.25 0.15

Capture and treat chlorofluorocarbons 0.05 1.00

Maintain environmental equipment 0.00 0.50

Toxic waste disposal 0.10 1.75

Excessive materials usage 0.08 0.25

Environmental cost per unit $0.78 $ 3.80Other manufacturing costs (nonenvironmental) 9.02 16.20

Unit cost $9.80 $20.00

Units produced 100,000 100,000

ABC Environmental Costing

Activities Cleanser A Cleanser B


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Product stewardshipisthe practice of

designing,manufacturing,

maintaining, andrecycling products to

minimize adverseenvironmental impacts.


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Life-cycle assessmentidentifies the

environmentalconsequences of a product

through its entire lifecycle, and then searches

for opportunities to obtain

environmentalimprovements.


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Life-cycle costassessmentassignscosts and benefits to

the environmentalconsequences andimprovements.


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Raw

Materials

Packaging

DisposalRecycling

Controlledby Supplier

Controlled by

Manufacturer

Production

Controlled by Customer

ProductUse and

Maintenance

Product-Life

Cycle Stages


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Inventory analysis

Impact analysis

Improvement

analysis

Assessment Stages


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Inventory analysis

specifies the types and

quantities of materials

and energy inputs

needed and the resulting

environmental releases

in the form of solid,liquid, and gaseous

residues.

Inventory Analysis


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Materials usage per cup:

Wood and bark (g) 33.0 0.0

Petroleum (g) 4.1 3.2

Finished weight (g) 10.0 11.5

Utilities per mg of material:

Steam (kg) 9,000-12,000 5,000

Power (GJ) 3.5 0.4-0.6

Cooling water (m3) 50 154

Water effluent per mg of material:

Volume (m3) 50-190 0.5-2.0

Suspended solids (kg) 35-60 trace

BOD (kg) 30-50 0.07

Organochlorides (kg) 5-7 0

Metal salts (kg) 1-20 20

PAPER CUP POLYFORM CUP


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Air Emissions per mg of material:

Chlorine (kg) 0.5 0

Sulfides (kg) 2.0 0

Particulates (kg) 5-15 0.1

Pentane (kg) 0 35-50Recycle potential:

Primary user Possible Easy

After use Low High

Ultimate disposal:

Heat recovery (Mj/kg) 20 40

Mass to landfill (g) 10.1 11.5

Biodegradable Yes No



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Material usage $0.010 $0.004

Utilities 0.012 0.003

Contaminant-related

resources 0.008 0.005Total private costs $0.030 $0.012

Recycling benefits

(societal) -0.001 -0.004Environmental cost

per unit $0.029 $0.008


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Impact analysisassesses theenvironmentaleffects of competingdesigns and provides

a relative ranking ofthose effects.

Impact Analysis


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Improvement analysishas the objective of

reducing theenvironmental impactsrevealed by theinventory and impact

steps.

Improvement Analysis


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Five core objectives for the environmentalperspectives:

Minimize the use of raw or virgin materials

Minimize the use of hazardous materials

Minimize energy requirements for production anduse of the product

Minimize the release of solid, liquid, and gaseousresidues

Maximize opportunities to recycle

Environmental Perspective


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Inspecting processes $ 200,000 $ 240,000

Operating pollution equipment 350,000 400,000

Maintaining pollution equipment 200,000 200,000

Cleaning up water pollution 700,000 900,000

Property damage claim 300,000 400,000

Totals $1,750,000 $2,140,000

NONVALUE-ADDED YEAR

ENVIRONMENTAL ACTIVITY 2004 2003


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Environmental Cost Trend Graph

1 2 3 4 5 6 7 8

EnvironmentalCosts/Sales

Periods


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0

20

40

60

80

100

2001 2002 2003 2004

Pounds emitted

Bar Graph for Trend Analysis

CFC Emissions


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Hazardous Waste Pie Chart

Incinerated

Deep-well injected

Landfilled

Recycled

Treated

Incinerated 35.0%

Deep-well injected

20.0%

Landfilled 25.0%

Recycled 5.0%

Treated 15.0%


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The End

Chapter Twelve


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3108021 management accounting hansen mowen ch12

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