Environmental Cost Report

Verde Company reported operating costs of $42,000,000 as of December 31, 20x5, with the following environmental costs:

Testing for contamination	$ 1,218,000
Inspecting products	714,000
Treating toxic waste	1,596,000
Obtaining ISO 14001 certification	714,000
Designing processes	462,000
Cleaning up oil spills	3,318,000
Maintaining pollution equipment	1,218,000
Cleaning up contaminated soil	4,998,000

Required:

1. Prepare an environmental cost report, classifying costs by quality category and expressing each as a percentage of total operating costs. Round percentages to two decimal places, if rounding is required. For example, 5.79% would be entered as "5.79".

Verde Company
Environmental Cost Report
For the Year Ended December 31, 20x5
	Environmental Cost	Total Environmental Cost	Percentage of Operating Costs
Prevention costs:
	$
		$	%
Detection costs:
	$
			%
Internal failure costs:
	$
			%
External failure costs:
	$
			%
Total quality costs		$	%

2. What if Verde deliberately did not include the cost of damaging the ecosystem because of solid waste disposal in its environmental cost report? What is the most likely reason?