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Gail B. Wright
Professor Emeritus of Accounting
Bryant University
MANAGEMENT
ACCOUNTING
8th EDITION
BY
HANSEN & MOWEN
17 ENVIRONMENTAL COST
1MANAGEMENT
INTRODUCTION
LEARNING
OBJECTIVES
LEARNING
OBJECTIVES
LEARNING GOALS
LEARNING
LEARNING OBJECTIVES
OBJECTIVES
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- & strategicbased environmental control.
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Questions to Think About
LEARNING
LEARNING OBJECTIVE
OBJECTIVE
Discuss the
importance of
measuring
environmental costs.
LO 1
Why is it important to
measure environmental
costs?
10
LO 1
ECOEFFICIENCY:
ECOEFFICIENCY: Definition
Definition
11
LO 1
SUSTAINABLE
SUSTAINABLE DEVELOPMENT:
DEVELOPMENT:
Definition
Definition
LO 1
ECOEFFICIENCY
Many things
provide causes &
incentives that
foster ecoefficiency.
EXHIBIT 17-1
13
LO 1
ENVIRONMENTAL QUALITY
COST MODEL
Looks
Looksatatcosts
costsand
andtheir
theirimpact
impactfor
fordamage
damage
done
doneto
tothe
theenvironment.
environment.In
Inaddition
additionto
to
direct
directcosts,
costs,there
thereare
arecosts
coststo
topreventing
preventing
environmental
environmentaldegradation.
degradation.
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LO 1
ENVIRONMENTAL DETECTION
COSTS
Are
Arecosts
coststo
todetermine
determinecompliance
compliancewith
with
appropriate
appropriateenvironmental
environmentalstandards
standards
including:
including:
Regulatory
Regulatorygovernment
governmentlaws
laws
Voluntary
Voluntarystandards
standards(ISO
(ISO14001)
14001)
Managements
Managementsenvironmental
environmentalpolicies
policies
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LO 1
16
LO 1
17
LO 1
ENVIRONMENTAL COST
REPORT
External
failure
costs are
the largest
costs.
EXHIBIT 17-3
18
LO 1
19
LO 1
ENVIRONMENTAL FINANCIAL
STATEMENT
Investments in
environmental
benefits
partially offset
environmental
costs.
EXHIBIT 17-4
20
LEARNING
LEARNING OBJECTIVE
OBJECTIVE
Explain how
environmental costs
are assigned to
products & processes.
21
LO 1
ASSIGNING ENVIRONMENTAL
COSTS
Product costs
Packaging
Products themselves
Process costs
Solid, liquid, gaseous residues
22
LO 2
ENVIRONMENTAL
ENVIRONMENTAL COSTING:
COSTING:
Definition
Definition
23
LO 2
THAMUS,
THAMUS, INC.:
INC.: Background
Background
Two
Twoapproaches
approachescan
canbe
beused
usedto
toassign
assign
environmental
environmentalcosts
coststo
toproducts:
products:
functional-based
functional-basedor
oractivity-based
activity-basedcosting.
costing.
Environmental
Environmentalcosts,
costs,often
oftenhidden
hiddenin
in
overhead
overheadare
areseparated
separatedout
outto
toassign
assignto
to
products.
products.Functional-based
Functional-basedcosting
costingmay
may
work
workwell
wellfor
forhomogeneous
homogeneousproducts,
products,but
but
Thamus
Thamusisisaadiversified,
diversified,multi-product
multi-product
firm.
firm.
24
LO 2
25
LEARNING
LEARNING OBJECTIVE
OBJECTIVE
26
LO 3
LIFE-CYCLE
LIFE-CYCLE ASSESSMENT:
ASSESSMENT:
Definition
Definition
Identifies environmental
consequences of a product
through its entire life cycle &
searches for improvements.
27
LO 3
EXHIBIT 17-6
28
LO 3
ASSESSMENT STAGES
3 formal stages
Inventory analysis
Types, quantities inputs needed
Environmental releases
Impact analysis
Effects of competing designs
Relative ranking of effects
Improvement analysis
Objective: to reduce environmental impacts
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LEARNING
LEARNING OBJECTIVE
OBJECTIVE
30
LO 4
ENVIRONMENTAL
PERSPECTIVE
5 objectives for environmental perspective
Minimize use of raw or virgin materials
Minimize use of hazardous materials
Minimize energy requirements for production, use
of product
Minimize release of solid, liquid, gaseous residues
Maximize opportunities to recycle
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LO 4
OBJECTIVES &
PERSPECTIVES
EXHIBIT 17-8
Companies need
measures to
evaluate whether
objectives of the
environmental
perspective are
being met.
32
LO 4
33
LO 4
34
LO 4
Costs as a
percentage of sales
trend downward
over time.
EXHIBIT 17-10
35
LO 4
EXHIBIT 17-11
36
LO 4
EXHIBIT 17-12
37
CHAPTER 17
THE
THE END
END
38