Verde Company reported operating costs of $46,000,000 as of December 31, 20x5, with the following environmental costs:

Testing for contamination	$ 1,104,000
Inspecting products	644,000
Treating toxic waste	1,886,000
Obtaining ISO 14001 certification	552,000
Designing processes	736,000
Cleaning up oil spills	3,588,000
Maintaining pollution equipment	598,000
Cleaning up contaminated soil	4,738,000

Required:

Question Content Area

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:
Cleaning up contaminated soilCleaning up oil spillsInspecting productsMaintaining pollution equipmentObtaining ISO 14001 certification	$- Select -
Cleaning up contaminated soilCleaning up oil spillsDesigning processesMaintaining pollution equipmentTesting for contamination	- Select -	$- Select -	- Select -%
Detection costs:
Cleaning up contaminated soilCleaning up oil spillsDesigning processesMaintaining pollution equipmentTesting for contamination	$- Select -
Cleaning up contaminated soilCleaning up oil spillsDesigning processesInspecting productsMaintaining pollution equipment	- Select -	- Select -	- Select -%
Internal failure costs:
Cleaning up contaminated soilCleaning up oil spillsDesigning processesInspecting productsTreating toxic waste	$- Select -
Cleaning up contaminated soilCleaning up oil spillsDesigning processesInspecting productsMaintaining pollution equipment	- Select -	- Select -	- Select -%
External failure costs:
Cleaning up oil spillsDesigning processesInspecting productsMaintaining pollution equipmentObtaining ISO 14001 certification	$- Select -
Cleaning up contaminated soilDesigning processesInspecting productsMaintaining pollution equipmentObtaining ISO 14001 certification	- Select -	- Select -	- Select -%
Total quality costs		$fill in the blank e4ad8409bffdfe2_25	fill in the blank e4ad8409bffdfe2_26%

Question Content Area

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?

The costs are inconsequential and are therefore immaterial.The costs are social costs and formal recognition is not required.The statement users have no interest in this cost.