At the end of 2007, 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:

Required:
1. Prepare an environmental cost report by category. Assume that total operating costs are $60,000,000.

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.

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2007 Settling personal injury claims $1,200,000 Treating and disposing of toxic waste Cleanup of chemically contaminated soil 4,800,000 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