Quality and Environmental Cost Management

CHAPTER 14

Quality and Environmental Cost Management

Collaborative Learning Exercise

OBJECTIVE 5

During the past four years, Monticello Company has made significant efforts to improve its environmental performance. Two of the strategic objectives that have received considerable attention are those of minimizing hazardous materials and minimizing release of liquid residues. Actually, two objectives are associated with hazardous waste. First, the company wants to reduce the amount produced. Second, the company wants to shift the ways of dealing with hazardous waste from landfill and deep well injections to such methods as incineration, treatment, and recycling. Lori Anders, president of Monticello, also required the Accounting Department to track and report on environmental progress. Internal and external environmental progress reports are prepared. The following data pertain to the two strategic objectives that have been emphasized.

Hazardous waste objective (measure is in tons):

Year / Incinerated / Treated / Recycled / Landfilled / Injection / Total
2010 / 2,000 / 2,000 / 1,000 / 35,000 / 10,000 / 50,000
2011 / 4,000 / 2,000 / 2,000 / 30,000 / 10,000 / 48,000
2012 / 8,000 / 3,000 / 3,000 / 25,000 / 7,000 / 46,000
2013 / 15,000 / 3,000 / 3,500 / 15,000 / 3,500 / 40,000

Liquid residue objective:

Year / Tons of Sulfates
2010 / 100
2011 / 92
2012 / 81
2013 / 73

The cost of landfilling hazardous waste is $50 per ton; injection is $60 per ton; incineration is $70 per ton; treatment is $100 per ton; and recycling produces a benefit of $10 per ton. Recycling, however, can be done only for a certain type of hazardous waste and only with a 70 percent successful yield. Treatment is also limited to certain types of waste. Fines, pollution control equipment, and expected cleanup costs are $4,000 per ton for the liquid residues.

Required:

Form groups of three to five members, where the total number of groups is at least four. Assign the letters A through D to each group. Groups with the A designation will solve Requirement 1, B will solve Requirement 2, C will solve Requirement 3, and D will solve Requirement 4. The groups will then share their answers with the other groups.

Prepare a bar graph for hazardous waste that shows trends. Comment on the progress revealed.
Prepare a pie chart for hazardous waste for the years 2010 and 2013. Comment on the progress in reducing reliance on landfills and injections.
Prepare a bar graph for the liquid residue.
Calculate the environmental cost for hazardous waste and liquid residue in 2010 and 2013. Comment on environmental progress as measured by the financial outcomes. Is it possible that the savings are understated? Explain.