P17.33 Cost analysis: winery LO 17.7 , 17.8 @ Margaret River Winery has developed the following analysis of its environmental costs and revenues for the last financial year: Employee training costs to improve the management of effluent disposal $ 5 600 Scrap value of broken bottles (12 561) Cleaning of exhaust fans 4 891 Fine for minor leakage of untreated waste into the Margaret River 12 569 Inspection of drainage systems 15 421 Restoring land where waste was dumped in the 1980s 16 986 Study tour to the Barossa Valley to select new equipment to reduce wastes 4 769 Developing air pollution monitoring systems 14 897 Lost sales due to poor environmental reputation 3 787 Workers' compensation claim due to poor environmental practices 5 652 Obtaining ISO 14001 certification 67 908 Total $139 919 Total costs for the plant were $1 309 670 per annum. Page 852 Required: 1. Classify each of the costs identified abov as tier 1 to tier as shown in Exhibit 17.5 @ 2. Suggest two examples each of environmental costs that could be classified as tier 3, tier 4 and tier 5 that may have been overlooked. 3. For each of the six costs identified in requirement 2, outline steps that the management of Margaret River Winery could implement to reduce those costs. Exhibit 17.5 Five tiers of environmental costs 1 Conventional costs Direct costs associated with capital expenditures, raw materials, and other operating and maintenance costs. 2 Hidden costs Hidden regulatory costs from activities such as monitoring and reporting of environmental activities and emissions, cost of searching for environmentally responsible suppliers, and the ongoing cost of cleaning up contaminated land. 3 Contingent costs Contingent liabilities arising from failure to clean up contaminated sites, and fines and penalties for non-compliance with regulations. 4 Relationship and image costs Less tangible costs and benefits that relate to consumer perceptions, and employee and community relations. 5 Societal costs Costs that organisations impose on othersthe environment and societyfor which they may not be held legally responsible and which cannot be compensated for in the legal system