hansen aise im ch17
TRANSCRIPT
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PowerPointPowerPoint Presentation by Presentation by
Gail B. WrightGail B. WrightProfessor Emeritus of AccountingProfessor Emeritus of AccountingBryant UniversityBryant University
© Copyright 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star Logo, and
South-Western are trademarks used herein under license.
MANAGEMENT ACCOUNTING
8th EDITION
BY
HANSEN & MOWEN
1 INTRODUCTION17 ENVIRONMENTAL COST MANAGEMENT
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LEARNING GOALS
After studying this chapter, you should be able to:
LEARNING OBJECTIVES
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1. Discuss the importance of measuring environmental costs.
2. Explain how environmental costs are assigned to products & processes.
3. Describe the life-cycle cost assessment model.
4. Compare & contrast activity- & strategic-based environmental control.
LEARNING OBJECTIVES
Click the button to skip Questions to Think About
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QUESTIONS TO THINK ABOUT: Thamus, Inc.
What are environmental costs? Are environmental costs
significant enough to track & report to management?
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QUESTIONS TO THINK ABOUT: Thamus, Inc.
Will improving environmental performance increase or
decrease total environmental costs?
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QUESTIONS TO THINK ABOUT: Thamus, Inc.
Should environmental costs be assigned to products &
processes as a separate item?
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QUESTIONS TO THINK ABOUT: Thamus, Inc.
What is the best way to control environmental costs?
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QUESTIONS TO THINK ABOUT: Thamus, Inc.
Should companies be concerned about environmental costs that
they cause but for which they do not have financial responsibility?
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1Discuss the importance of measuring environmental costs.
LEARNING OBJECTIVE
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Why is it important to measure environmental
costs?
Awareness of environmental costs is important because
environmental regulations & fines have increased.
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ECOEFFICIENCY: Definition
Maintains that producing more useful goods, services is consistent with reducing
negative environmental impacts.
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SUSTAINABLE DEVELOPMENT: Definition
Is development that meets needs of present without
compromising ability of future generations to meet their own
needs.
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ECOEFFICIENCYLO 1
EXHIBITEXHIBIT 17-117-1
Many things provide causes & incentives that foster ecoefficiency.
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ENVIRONMENTAL QUALITY COST MODEL
Looks at costs and their impact for damage done to the environment. In addition to direct costs, there are costs to preventing environmental degradation.
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ENVIRONMENTAL DETECTION COSTS
Are costs to determine compliance with appropriate environmental standards including:Regulatory government lawsVoluntary standards (ISO 14001)Management’s environmental policies
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What are environmental external failure costs?
Environmental external failure costs are costs of activities
performed after discharging contaminants & waste into the
environment.
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What information does an environmental cost report
provide?
Environmental cost reports reveal 1) the impact of environmental costs on firm profitability & 2) relative amounts expended in
each category.
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ENVIRONMENTAL COST REPORT
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EXHIBITEXHIBIT 17-317-3
External failure costs are the largest costs.
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Can environmental failure costs be reduced?
Yes! Investing more in prevention & detection activities will
reduce environmental failure costs.
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ENVIRONMENTAL FINANCIAL STATEMENT
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EXHIBITEXHIBIT 17-417-4
Investments in environmental benefits partially offset environmental costs.
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2Explain how environmental costs are assigned to products & processes.
LEARNING OBJECTIVE
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ASSIGNING ENVIRONMENTAL COSTS
Product costsPackagingProducts themselves
Process costsSolid, liquid, gaseous residues
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ENVIRONMENTAL COSTING: Definition
Full environmental costing assigns both private & societal costs to products. Private costs
are caused by internal processes.
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THAMUS, INC.: Background
Two approaches can be used to assign environmental costs to products: functional-based or activity-based costing. Environmental costs, often hidden in overhead are separated out to assign to products. Functional-based costing may work well for homogeneous products, but Thamus is a diversified, multi-product firm.
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FORMULA: Cadmium Example
Costs are assigned proportionately when multiple products are produced.
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External failure cost:
= Total failure cost ÷ Units produced
= $150,000 / 20,000 = $7.50 per unit
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3 Describe the life-cycle cost assessment model.
LEARNING OBJECTIVE
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LIFE-CYCLE ASSESSMENT: Definition
Identifies environmental consequences of a product
through its entire life cycle & searches for improvements.
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PRODUCT LIFE-CYCLE STAGESLO 3
EXHIBITEXHIBIT 17-617-6
Some costs are controlled by the supplier while others are controlled by customers.
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ASSESSMENT STAGES3 formal stages
Inventory analysisTypes, quantities inputs neededEnvironmental releases
Impact analysisEffects of competing designsRelative ranking of effects
Improvement analysisObjective: to reduce environmental impacts
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4 Compare & contrast activity- & strategic-based environmental control.
LEARNING OBJECTIVE
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ENVIRONMENTAL PERSPECTIVE
5 objectives for environmental perspectiveMinimize use of raw or virgin materialsMinimize use of hazardous materialsMinimize energy requirements for production, use
of productMinimize release of solid, liquid, gaseous residuesMaximize opportunities to recycle
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OBJECTIVES & PERSPECTIVES
LO 4
EXHIBITEXHIBIT 17-817-8
Companies need measures to evaluate whether objectives of the environmental perspective are being met.
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Are environmental activities non-value-added?
Because environmental pollution is equivalent to economic
inefficiency, all failure activities are non-value-added.
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What are some good ways to examine effects of
environmental activities?
Graphical presentations are effective in depicting positive
benefits of environmental.
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ENVIRONMENTAL COST TREND GRAPH
LO 4
EXHIBITEXHIBIT 17-1017-10
Costs as a percentage of sales trend downward over time.
%
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BAR GRAPH FOR TRENDSLO 4
EXHIBITEXHIBIT 17-1117-11
Emissions trend downward over time.
%
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HAZARDOUS WASTE PIE CHART
LO 4
EXHIBITEXHIBIT 17-1217-12
Pie chart depicts proportional hazardous wastes.
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THE END
CHAPTER 17