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Cost Management ACCOUNTING AND CONTROL
HANSEN & MOWEN
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Environmental Costs: Measurement and Control
CHAPTER 16 Environmental Costs: Measurement and Control
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Defining, Measuring, and Controlling Environmental Costs
OBJECTIVE 1 Ecoefficiency essentially maintains that organizations can produce more useful goods and services while simultaneously reducing negative environmental impacts, resource consumption, and costs.
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The Ecoefficiency Paradigm
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 The Ecoefficiency Paradigm (1) Reduce the consumption of resources (2) Reduce the environmental impact (3) Increase product value (4) Reduce environmental liability
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Ecoefficiency Relationships
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Ecoefficiency Relationships continued
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Ecoefficiency Relationships
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Ecoefficiency Relationships continued
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Defining, Measuring, and Controlling Environmental Costs
OBJECTIVE 1 Environmental 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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Prevention Activities
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Classification of Environmental Costs by Activity Prevention Activities Evaluating and selecting suppliers Evaluating and selecting pollution control equipment Designing processes Designing products Carrying out environmental studies Auditing environmental risks Developing environmental management systems Recycling products Obtaining ISO certification
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Classification of Environmental Costs by Activity
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Classification of Environmental Costs by Activity Detection Activities Auditing environmental activities Inspecting products and processes Developing environmental performance measures Testing for contamination Verifying supplier environmental performance Measuring contamination levels
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Internal Failure Activities
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Classification of Environmental Costs by Activity Internal Failure Activities Operating pollution control equipment Treating and disposing of toxic waste Maintaining pollution equipment Licensing facilities for producing contaminants Recycling scrap
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External Failure Activities
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Classification of Environmental Costs by Activity External Failure Activities 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 reputation continued
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External Failure Activities
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Classification of Environmental Costs by Activity External Failure Activities Receiving medical care due to polluted air Losing employment because of contamination Losing a lake for recreational use Damaging ecosystems from solid waste disposal Societal costs
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Environmental Cost Report
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Environmental Cost Report
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Relative Distribution: Environmental Costs
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Relative Distribution: Environmental Costs
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Environmental Financial Statement
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Environmental Financial Statement continued
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Environmental Financial Statement
Defining, Measuring, and Controlling Environmental Costs OBJECTIVE 1 Environmental Financial Statement
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2 Environmental Costing Unit-Based Environmental Cost Assignments—
OBJECTIVE 2 Unit-Based Environmental Cost Assignments— Environmental costs are separated into a cost pool Costs are assigned to individual products using unit-level drivers Best for a homogeneous product setting
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ABC Environmental Costing
OBJECTIVE 2 ABC Environmental Costing
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3 Life-Cycle Cost Assessment
OBJECTIVE 3 Life cycle assessment identifies the environmental consequences of a product through its entire life cycle and then searches for opportunities to obtain environmental improvements.
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3 Life-Cycle Cost Assessment Product-Life Cycle Stages Raw Materials
OBJECTIVE 3 Raw Materials Controlled by Supplier Product-Life Cycle Stages Production Controlled by Manufacturer Packaging Product Use and Maintenance Recycling Disposal Controlled by Customer
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3 Assessment Stages Life-Cycle Cost Assessment (1) Inventory analysis
OBJECTIVE 3 Assessment Stages (1) Inventory analysis (2) Impact analysis (3) Improvement analysis
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3 Life-Cycle Cost Assessment
OBJECTIVE 3 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.
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Life-Cycle Cost Assessment
OBJECTIVE 3 Inventory Analysis continued
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Life-Cycle Cost Assessment
OBJECTIVE 3 Inventory Analysis
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3 Life-Cycle Cost Assessment
OBJECTIVE 3 Impact analysis assesses the environmental effects of competing designs and provides a relative ranking of those effects.
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3 Life-Cycle Cost Assessment
OBJECTIVE 3 Cost assessment determines the financial consequences of the environmental impacts identified in the inventory and improvement steps of life-cycle assessment.
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3 Life-Cycle Cost Assessment
OBJECTIVE 3 Improvement analysis has the objective of reducing the environmental impacts revealed by the inventory and impact steps.
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4 Five core objectives for the environmental perspectives:
Strategic-Based Environmental Responsibility Accounting Five core objectives for the environmental perspectives: Minimize hazardous materials Minimize raw or virgin materials Minimize energy requirements Minimize the release of residues Maximize opportunities to recycle
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Objectives and Measures: Environmental Perspective
4 Strategic-Based Environmental Responsibility Accounting Objectives and Measures: Environmental Perspective
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Non-Value-Added Cost Trends: Environmental Costs
OBJECTIVE 4 Strategic-Based Environmental Responsibility Accounting Non-Value-Added Cost Trends: Environmental Costs
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Environmental Cost Trend Graph
OBJECTIVE 4 Strategic-Based Environmental Responsibility Accounting Environmental Cost Trend Graph
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Bar Graph for Trend Analysis
OBJECTIVE 4 Strategic-Based Environmental Responsibility Accounting Bar Graph for Trend Analysis CFC Emissions 100 80 60 40 20 2004 2005 2006 2007 Pounds emitted
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Hazardous Waste Management Pie Chart
OBJECTIVE 4 Strategic-Based Environmental Responsibility Accounting Hazardous Waste Management Pie Chart
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End of Chapter 16
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