Environmental and Social Management Accounting (EMA): Its Contribution to Business Sustainability
Princess Pty Ltd operates under the brand name of 'Fine Chocolates'. Princess Pty Ltd is preparing to design and implement sustainability systems and processes for its business creating fine chocolates. You are the assistant accountant and you are advised by the environmental director that electricity is a key resource for the business, for operating and for security lighting. The company operates chocolate crafting and production for 250 days of the year (5 days times 52 weeks = 260 days less 10 public holidays). You report directly to Rosemary Rae, the CFO. Princess P/L is interested in saving electricity costs, so they are considering changing the type and quality of the lighting in their factory that will last for the next 10 years. Princess Pty Ltd will sell the 'fine chocolates' brand name to a competitor after 10 years from now and cease operating so the owner (sole shareholder) can retire. Internal lights are used from 8.00 am to 5.00 pm each day (Monday to Friday) for 250 days a year. The light bulbs will have to be replaced according to the following schedule: (Note Princess Pty Ltd will not replace the bulbs in Year 10 as the business will stop operating). Light bulb type Number of years before needing replacement Halogen (internal lighting) Every 2 years Compact Fluorescent (internal lighting) Every 6 years LED (internal lighting) Every 10 years Sodium vapour lamps (external security lighting) Every 10 years After several robberies, Princess Pty Ltd have been given two options. First option is to pay an additional $390 insurance premium each year for the next 10 years. Second option is to install and run security lights from 6 pm to 4 am for 365 days of the year to avoid this additional premium. Lighting Current Halogen LED strips 5 15 70 Number of lights Wattage of lights Electricity cost per kWh Cost of brackets for each new bulb Cost of each light bulb Compact Fluoro 10 19 $0.32 $8.00 $6.00 Sodium Vapour Lamp 2 120 $0.32 $25.00 $400.00 15 $0.32 $15.00 $10.00 $0.32 None $3.00 Required: for case study 4 (21 marks) Please note answers should be to two decimal points (cents) a) Calculate the annual electricity cost to the business for 10 years for each of the three different types of internal light bulbs. (Hint: convert Watts to kWh). (4 marks) b) Calculate the total cost, including the cost of installing the different internal light fittings or light brackets for the period of 10 years (assuming that there are no changes in prices over the 10 year period). (4 marks) c) (i) Calculate the cost of the external security lighting (Sodium vapour lamps). (ii) Comment on whether it is worth buying and installing security lighting compared with the increase in yearly insurance premiums. (5 marks) d) Compare and describe the cost results for the 3 options calculated in requirements 1 and 2 as well as the 2 options calculated and compared under requirement 3. You must provide a FORMAL written report to your supervisor giving your recommendations of how your organisation should proceed. You MUST refer to your calculations in your analysis (not just describe the calculations). Discuss any non-financial factors that need to be considered. (You will be marked on the quality of your written letter, with headings, spelling and grammar for this section d). (8 marks)
