At the end of 2010, Hender Chemicals began to implement an environmental quality management program. As a first step, it identified the following costs in its accounting records as environmentally related for the year just ended:
2010
Settling personal injury claims ………………. $1,200,000
Treating and disposing of toxic waste ………… 4,800,000
Cleanup of chemically contaminated soil …….. 1,800,000
Inspecting products and processes ……………… 600,000
Operating pollution control equipment ………….. 840,000
Licensing facilities for producing contaminants … 360,000
Evaluating and selecting suppliers ………………. 120,000
Developing performance measures ……………….. 60,000
Recycling products ……………………………….. 75,000
Required:
1. Prepare an environmental cost report by category. Assume that total operating costs are $60,000,000.
2. Create a pie chart to illustrate the relative distribution percentages for each environmental cost category. Comment on what this distribution communicates to a manager.