ACC3200 Chapter Notes - Chapter 6: Management Accounting, Occupational Safety And Health, Quality Costs
Management Accounting Chapter 6 Notes
Defining environmental costs
• As explained in an earlier section, environmental costs are the costs that an
organisation incurs to prevent, monitor and report environmental impacts.
• They can also include the costs an organisation incurs when it does not comply with
environmental regulations, some of which may extend well into the future.
• Some organisations may define environmental costs very narrowly, including only
costs that have a direct effect on profits.
• Other organisations may include costs that result from the organisation’s activities
and operations but are external to the organisation.
• As part of a management accounting system:
o An organisation may report any or all of these types of environmental costs
o Depending on how managers intend to use the information.
• Tier 1 costs, conventional costs, can be found in the accounting systems of most
organisations.
• However, may not be reported in a form that can be readily used by managers to
assess environmental expenditure.
• These include the costs of purchasing equipment and plant that will prevent
environmental impacts
Private costs
• Environmental costs that directly affect the profit of the organisation or are costs for
which the organisation can be held legally accountable
Analysing environmental costs
• Many of the management accounting techniques described in other chapters of this
book can help to measure and analyse environmental costs.
• These include:
o Activity-based costing