At the end of 2015, Bing Pharmaceuticals 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 calendar year just ended:
2015
Settling personal injury claims ........... $ 3,000,000
Treating and disposing of toxic waste ......... 12,000,000
Cleanup of chemically contaminated soil ......... 4,500,000
Inspecting products and processes ............. 1,500,000
Operating pollution control equipment........ 2,100,000
Licensing facilities for producing contaminants.......900,000
Evaluating and selecting suppliers ..............300,000
Developing performance measures .............150,000
Recycling products ....................187,500
Required:
1. Prepare an environmental cost report by category. Assume that total operating costs are $150,000,000.
2. Use a pie chart to illustrate the relative distribution percentages for each environmental cost category. Comment on what this distribution communicates to a manager.