Medium2 marksMultiple Choice

Specialist cost and management accounting techniquesEnvironmental Management AccountingSection B

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Section B - Case 1: VoltCell Manufacturing

VoltCell is a heavy manufacturing and tech company that produces advanced solid-state batteries for electric vehicles. The company is evaluating a new battery model, the 'QuantumCell', which has an expected life cycle of 4 years.

The estimated costs over the life cycle are as follows:

Research and Development: $4,500,000
Product Design and Testing: $1,500,000
Manufacturing costs: $250 per unit
Marketing and Distribution: $2,000,000 total over 4 years
End-of-life recycling and disposal costs: $1,000,000

VoltCell expects to produce and sell a total of 100,000 units of the QuantumCell over its 4-year life cycle.

Calculate the total life cycle cost per unit for the QuantumCell. (Enter the numerical value only)

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ACCA · Question 19 · Specialist cost and management accounting techniques

Section B - Case 1: VoltCell Manufacturing

VoltCell is a heavy manufacturing and tech company that produces advanced solid-state batteries for electric vehicles. The company is evaluating a new battery model, the 'QuantumCell', which has an expected life cycle of 4 years.

VoltCell is implementing Environmental Management Accounting (EMA). The $1,000,000 end-of-life recycling and disposal cost for the QuantumCell batteries is currently hidden in general overheads.

Under the EMA framework, how should this $1,000,000 cost be classified?

Answer options:

External environmental cost

Internal environmental cost

Environmental prevention cost

Contingent environmental cost

How to approach this question

Determine who is paying the cost (the company or society) to decide between internal and external. Then determine the nature of the cost.

Full Answer

B.Internal environmental cost✓ Correct

Internal environmental costs are costs that have a direct financial impact on the company (they pay for it). Because VoltCell is paying the $1,000,000 for recycling and disposal, it is an internal cost. External costs are those imposed on society (like carbon emissions) that the company does not currently pay for.

Common mistakes

Classifying it as an external cost simply because it happens at the 'end' of the product's life or outside the factory.

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