ExpertMedium2 marksMultiple Choice
ACCA · Question 6 · Specialist cost and management accounting techniques
Section A
EcoSteel manufactures industrial beams. The company is implementing Environmental Management Accounting (EMA). It has identified the cost of running its effluent treatment plant, which cleans water before discharging it into the river.
Under the EMA framework, how should the cost of running the effluent treatment plant be classified?
Section A
EcoSteel manufactures industrial beams. The company is implementing Environmental Management Accounting (EMA). It has identified the cost of running its effluent treatment plant, which cleans water before discharging it into the river.
Under the EMA framework, how should the cost of running the effluent treatment plant be classified?
Answer options:
A.
Environmental prevention cost
B.
Environmental appraisal cost
C.
Environmental internal failure cost
D.
Environmental external failure cost
How to approach this question
Determine if the pollution has been created (yes) and if it has left the factory (no). This points to internal failure.
Full Answer
C.Environmental internal failure cost✓ Correct
In EMA, costs are often categorized similarly to quality costs. Internal failure costs are incurred when environmental damage is produced but contained/treated within the organization before it affects the external environment (e.g., effluent treatment).
Common mistakes
Classifying it as a prevention cost. Prevention means not creating the waste at all.
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