AKUNTANSI MANAJEMEN OPENCOURSEWARE UNIVERSITAS PEMBANGUNAN JAYA ch12 Slide ACC204 ch12
12 -1
CHAPTER
Environment
Cost
Management
12 -2
Objectives
Objectives
1. Discuss the importance
of measuring
After
studying
After studying this
this
environmentchapter,
costs. you should
chapter, you should
2. Explain how environmental
costs
are
be
able
to:
be able to:
assigned to products and processes.
3. Describe the life-cycle cost assessment
model.
4. Compare and contrast activity- and strategicbased environmental control.
12 -3
The Benefits of Ecoefficiency
Ecoefficiency essentially
maintains that organizations
can produce more useful
goods and services while
simultaneously reducing
negative environmental
impacts, resource
consumption, and costs.
12 -4
Incentives and causes for increased
efficiency:
1) Customers are
demanding products
that are
environmental
friendly
12 -5
Incentives and causes for increased
efficiency:
1) Customers are
demanding products
that are
environmental
friendly
2) Employees prefer to
work for
environmentally
respective firms
12 -6
Causes
Causes and
and
Incentives
Incentives for
for
Ecoefficiency
Ecoefficiency
Customer Demand
For Cleaner Products
12 -7
Cost Reduction and
Competitive
Advantage
Better Employees
and Greater
Productivity
ECOEFFICENCY
Innovations and
New Opportunities
Lower Cost of
Capital and Lower
Insurance
Significant Special Benefits
Leading to Improved Image
12 -8
Environmental Quality
Cost Model
Environmental costs are costs that are incurred
because poor environmental quality exists or may
exist.
Environmental
Environmental costs
costs can
can be
be classified
classified in
in four
four
categories:
categories: prevention
prevention costs,
costs, detection
detection costs,
costs, internal
internal
failure
failure costs,
costs, and
and external
external failure
failure costs.
costs.
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 14001 certification
12 -9
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
12 -10
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
Recycle scrap
12 -11
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
Using materials and energy inefficiently
Receiving medical care due to polluted air (S)
Losing employment because of contamination (S)
12 -12
12 -13
Numade Corporation
Environmental Cost Report
For the Year Ended December 31, 2004
Environmental Costs
Prevention costs:
Training employees
Designing products
Selecting equipment
Detection costs:
Inspecting processes
Developing measures
Percentage of
Operating Costs
$ 60,000
180,000
40,000
$280,000
$240,000
80,000
320,000
Continued
Continued
1.40%
1.60
12 -14
Environmental Costs
Internal failure costs:
Operating pollution
equipment
Maintaining pollution
equipment
External failure costs:
Cleaning up lake
Restoring land
Incurring property
damage claim
Totals
Percentage of
Operating Costs
$400,000
200,000 $ 600,000
3.00%
$900,000
500,000
400,000
1,800,000
$3,000,000
9.00
15.00%
12 -15
Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004
Environmental benefits:
Cost reductions, contaminants
$ 300,000
Cost reductions, hazardous waste disposal
400,000
Recycling income
200,000
Energy conservation cost savings
100,000
Packaging cost reductions
150,000
Total environmental benefits
Continued
Continued
$1,150,000
12 -16
Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004
Environmental costs:
Prevention costs
$ 280,000
Detection costs
320,000
Internal failure costs
600,000
External failure costs
100,000
Packaging cost reductions
Total environmental costs
1,800,000
$1,150,000
12 -17
Environment Product Costs
The environmental costs of
processes that produce,
market, and deliver products
and the environmental
postpurchase costs caused by
the use and disposal of the
products are examples of
environmental product costs.
12 -18
Full
Full environmental
environmental
costing
costing isis the
the
assignment
assignment of
of all
all
environmental
environmental costs,
costs,
both
both private
private and
and
societal,
societal, to
to products.
products.
12 -19
Full
Full private
private
costing
costing isis the
the
assignment
assignment of
of
only
only private
private cost
cost
to
to individual
individual
products.
products.
Private costing is probably a good starting point
for many firms.
Private costs can be assigned using data created
inside the firm.
ABC
ABC Environmental
Environmental Costing
Costing
Activities
Evaluate and select suppliers
Cleanser A Cleanser B
$0.20$ 0.05
Design processes (to reduce pollution)
0.100.10
Inspect processes (for pollution problems)
0.250.15
Capture and treat chlorofluorocarbons
0.051.00
Maintain environmental equipment
0.000.50
Toxic waste disposal
0.101.75
Excessive materials usage
0.08
Environmental cost per unit
Other manufacturing costs (nonenvironmental)
Unit cost
Units produced
0.25
$0.78$ 3.80
9.02
16.20
$9.80$20.00
100,000100,000
12 -20
12 -21
Product stewardship is the
practice of designing,
manufacturing,
maintaining, and
recycling products to
minimize adverse
environmental impacts.
12 -22
Life-cycle assessment
identifies the
environmental
consequences of a product
through its entire life
cycle, and then searches
for opportunities to obtain
environmental
improvements.
12 -23
Life-cycle cost assessment
assigns costs and benefits
to the environmental
consequences and
improvements.
Product-Life
Product-Life
Cycle
Cycle Stages
Stages
12 -24
Raw
Materials
Controlled
by
Supplier
Production
Controlled by
Manufacturer
Packaging
Recycling
Product
Use and
Maintenance
Controlled by Customer
Disposal
12 -25
Assessment Stages
Inventory analysis
Impact analysis
Improvement
analysis
12 -26
Inventory Analysis
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.
12 -27
PAPER CUP
Materials usage per cup:
Wood and bark (g)
Petroleum (g)
Finished weight (g)
33.00.0
4.13.2
10.011.5
Utilities per mg of material:
Steam (kg)
9,000-12,0005,000
Power (GJ)
3.50.4-0.6
Cooling water (m3)
50154
Water effluent per mg of material:
Volume (m3)
50-1900.5-2.0
Suspended solids (kg)
35-60trace
BOD (kg)
30-500.07
Organochlorides (kg)
Metal salts (kg)
5-70
1-2020
POLYFORM CUP
12 -28
PAPER CUP
Air Emissions per mg of material:
Chlorine (kg)
0.50
Sulfides (kg)
2.00
Particulates (kg)
Pentane (kg)
5-150.1
035-50
Recycle potential:
Primary user
After use
PossibleEasy
LowHigh
Ultimate disposal:
Heat recovery (Mj/kg)
Mass to landfill (g)
Biodegradable
2040
10.111.5
YesNo
POLYFORM CUP
12 -29
PAPER CUP
Material usage
POLYFORM CUP
$0.010
$0.004
Utilities
0.012
0.003
Contaminant-related
resources
0.008
0.005
$0.030
$0.012
-0.001
-0.004
Environmental cost
per unit
$0.029
$0.008
Total private costs
Recycling benefits
(societal)
12 -30
Impact Analysis
Impact analysis assesses
the environmental effects
of competing designs and
provides a relative
ranking of those effects.
12 -31
Improvement Analysis
Improvement analysis has
the objective of reducing
the environmental impacts
revealed by the inventory
and impact steps.
12 -32
Environmental
Environmental Perspective
Perspective
Five core objectives for the environmental perspectives:
Minimize the use of raw or virgin materials
Minimize the use of hazardous materials
Minimize energy requirements for production and use of
the product
Minimize the release of solid, liquid, and gaseous
residues
Maximize opportunities to recycle
12 -33
NONVALUE-ADDED
ENVIRONMENTAL ACTIVITY
Inspecting processes
YEAR
2004
2003
$ 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
$1,750,000
$2,140,000
Totals
Environmental Cost Trend Graph
Environmental
Costs/Sales
1
2
3
4
5
Periods
6
7
8
12 -34
Bar Graph for Trend Analysis
CFC Emissions
100
80
60
40
20
0
2001
2002
2003
Pounds emitted
2004
12 -35
Hazardous Waste Pie Chart
Treated 15.0%
Incinerated 35.0%
Recycled 5.0%
Landfilled 25.0%
Incinerated
Treated
Recycled
Landfilled
Deep-well injected
Deep-well injected
20.0%
12 -36
12 -37
Chapter Twelve
The
The End
End
12 -38
CHAPTER
Environment
Cost
Management
12 -2
Objectives
Objectives
1. Discuss the importance
of measuring
After
studying
After studying this
this
environmentchapter,
costs. you should
chapter, you should
2. Explain how environmental
costs
are
be
able
to:
be able to:
assigned to products and processes.
3. Describe the life-cycle cost assessment
model.
4. Compare and contrast activity- and strategicbased environmental control.
12 -3
The Benefits of Ecoefficiency
Ecoefficiency essentially
maintains that organizations
can produce more useful
goods and services while
simultaneously reducing
negative environmental
impacts, resource
consumption, and costs.
12 -4
Incentives and causes for increased
efficiency:
1) Customers are
demanding products
that are
environmental
friendly
12 -5
Incentives and causes for increased
efficiency:
1) Customers are
demanding products
that are
environmental
friendly
2) Employees prefer to
work for
environmentally
respective firms
12 -6
Causes
Causes and
and
Incentives
Incentives for
for
Ecoefficiency
Ecoefficiency
Customer Demand
For Cleaner Products
12 -7
Cost Reduction and
Competitive
Advantage
Better Employees
and Greater
Productivity
ECOEFFICENCY
Innovations and
New Opportunities
Lower Cost of
Capital and Lower
Insurance
Significant Special Benefits
Leading to Improved Image
12 -8
Environmental Quality
Cost Model
Environmental costs are costs that are incurred
because poor environmental quality exists or may
exist.
Environmental
Environmental costs
costs can
can be
be classified
classified in
in four
four
categories:
categories: prevention
prevention costs,
costs, detection
detection costs,
costs, internal
internal
failure
failure costs,
costs, and
and external
external failure
failure costs.
costs.
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 14001 certification
12 -9
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
12 -10
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
Recycle scrap
12 -11
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
Using materials and energy inefficiently
Receiving medical care due to polluted air (S)
Losing employment because of contamination (S)
12 -12
12 -13
Numade Corporation
Environmental Cost Report
For the Year Ended December 31, 2004
Environmental Costs
Prevention costs:
Training employees
Designing products
Selecting equipment
Detection costs:
Inspecting processes
Developing measures
Percentage of
Operating Costs
$ 60,000
180,000
40,000
$280,000
$240,000
80,000
320,000
Continued
Continued
1.40%
1.60
12 -14
Environmental Costs
Internal failure costs:
Operating pollution
equipment
Maintaining pollution
equipment
External failure costs:
Cleaning up lake
Restoring land
Incurring property
damage claim
Totals
Percentage of
Operating Costs
$400,000
200,000 $ 600,000
3.00%
$900,000
500,000
400,000
1,800,000
$3,000,000
9.00
15.00%
12 -15
Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004
Environmental benefits:
Cost reductions, contaminants
$ 300,000
Cost reductions, hazardous waste disposal
400,000
Recycling income
200,000
Energy conservation cost savings
100,000
Packaging cost reductions
150,000
Total environmental benefits
Continued
Continued
$1,150,000
12 -16
Numade Corporation
Environmental Financial Statement
For the Year Ended December 31, 2004
Environmental costs:
Prevention costs
$ 280,000
Detection costs
320,000
Internal failure costs
600,000
External failure costs
100,000
Packaging cost reductions
Total environmental costs
1,800,000
$1,150,000
12 -17
Environment Product Costs
The environmental costs of
processes that produce,
market, and deliver products
and the environmental
postpurchase costs caused by
the use and disposal of the
products are examples of
environmental product costs.
12 -18
Full
Full environmental
environmental
costing
costing isis the
the
assignment
assignment of
of all
all
environmental
environmental costs,
costs,
both
both private
private and
and
societal,
societal, to
to products.
products.
12 -19
Full
Full private
private
costing
costing isis the
the
assignment
assignment of
of
only
only private
private cost
cost
to
to individual
individual
products.
products.
Private costing is probably a good starting point
for many firms.
Private costs can be assigned using data created
inside the firm.
ABC
ABC Environmental
Environmental Costing
Costing
Activities
Evaluate and select suppliers
Cleanser A Cleanser B
$0.20$ 0.05
Design processes (to reduce pollution)
0.100.10
Inspect processes (for pollution problems)
0.250.15
Capture and treat chlorofluorocarbons
0.051.00
Maintain environmental equipment
0.000.50
Toxic waste disposal
0.101.75
Excessive materials usage
0.08
Environmental cost per unit
Other manufacturing costs (nonenvironmental)
Unit cost
Units produced
0.25
$0.78$ 3.80
9.02
16.20
$9.80$20.00
100,000100,000
12 -20
12 -21
Product stewardship is the
practice of designing,
manufacturing,
maintaining, and
recycling products to
minimize adverse
environmental impacts.
12 -22
Life-cycle assessment
identifies the
environmental
consequences of a product
through its entire life
cycle, and then searches
for opportunities to obtain
environmental
improvements.
12 -23
Life-cycle cost assessment
assigns costs and benefits
to the environmental
consequences and
improvements.
Product-Life
Product-Life
Cycle
Cycle Stages
Stages
12 -24
Raw
Materials
Controlled
by
Supplier
Production
Controlled by
Manufacturer
Packaging
Recycling
Product
Use and
Maintenance
Controlled by Customer
Disposal
12 -25
Assessment Stages
Inventory analysis
Impact analysis
Improvement
analysis
12 -26
Inventory Analysis
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.
12 -27
PAPER CUP
Materials usage per cup:
Wood and bark (g)
Petroleum (g)
Finished weight (g)
33.00.0
4.13.2
10.011.5
Utilities per mg of material:
Steam (kg)
9,000-12,0005,000
Power (GJ)
3.50.4-0.6
Cooling water (m3)
50154
Water effluent per mg of material:
Volume (m3)
50-1900.5-2.0
Suspended solids (kg)
35-60trace
BOD (kg)
30-500.07
Organochlorides (kg)
Metal salts (kg)
5-70
1-2020
POLYFORM CUP
12 -28
PAPER CUP
Air Emissions per mg of material:
Chlorine (kg)
0.50
Sulfides (kg)
2.00
Particulates (kg)
Pentane (kg)
5-150.1
035-50
Recycle potential:
Primary user
After use
PossibleEasy
LowHigh
Ultimate disposal:
Heat recovery (Mj/kg)
Mass to landfill (g)
Biodegradable
2040
10.111.5
YesNo
POLYFORM CUP
12 -29
PAPER CUP
Material usage
POLYFORM CUP
$0.010
$0.004
Utilities
0.012
0.003
Contaminant-related
resources
0.008
0.005
$0.030
$0.012
-0.001
-0.004
Environmental cost
per unit
$0.029
$0.008
Total private costs
Recycling benefits
(societal)
12 -30
Impact Analysis
Impact analysis assesses
the environmental effects
of competing designs and
provides a relative
ranking of those effects.
12 -31
Improvement Analysis
Improvement analysis has
the objective of reducing
the environmental impacts
revealed by the inventory
and impact steps.
12 -32
Environmental
Environmental Perspective
Perspective
Five core objectives for the environmental perspectives:
Minimize the use of raw or virgin materials
Minimize the use of hazardous materials
Minimize energy requirements for production and use of
the product
Minimize the release of solid, liquid, and gaseous
residues
Maximize opportunities to recycle
12 -33
NONVALUE-ADDED
ENVIRONMENTAL ACTIVITY
Inspecting processes
YEAR
2004
2003
$ 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
$1,750,000
$2,140,000
Totals
Environmental Cost Trend Graph
Environmental
Costs/Sales
1
2
3
4
5
Periods
6
7
8
12 -34
Bar Graph for Trend Analysis
CFC Emissions
100
80
60
40
20
0
2001
2002
2003
Pounds emitted
2004
12 -35
Hazardous Waste Pie Chart
Treated 15.0%
Incinerated 35.0%
Recycled 5.0%
Landfilled 25.0%
Incinerated
Treated
Recycled
Landfilled
Deep-well injected
Deep-well injected
20.0%
12 -36
12 -37
Chapter Twelve
The
The End
End
12 -38