Section A

ChemCorp, a heavy chemical manufacturer, is implementing Environmental Management Accounting (EMA). They are using the 'Input/Output analysis' method.

What is the fundamental principle behind Input/Output analysis in EMA?

Environmental costs are allocated based on the number of output units produced.

What goes in must come out; therefore, any material input that does not end up in the final product is considered waste.

It separates environmental costs into prevention, appraisal, internal failure, and external failure costs.

It focuses solely on the monetary value of outputs sold to the external market.