Question

1.The contemporary management tool that focuses on restrictions that limit a firm's ability to maximise long-run profit is commonly known as:

	a.	Simulation.
	b.	Linear progression.
	c.	Constraint manipulation.
	d.	Theory of constraints.
	e.	e. Game theory. 2.From the following list of management accounting techniques and/or frameworks, which of them are employed to measure and analyse environmental costs? 1) Activity-based costing. 2) Just in time inventory systems. 3) Quality framework. 4) Life cycle costing. 5) Customer profitability analysis. a. All five. b. 1 and 3. c. 1, 2 and 3. d. 1, 3 and 5. e. 1, 3 and 4. 3.Which statement below is the most correct statement explaining the use of the quality framework (prevention, appraisal, internal and external failure) to analyse environmental costs? a. The firm is attempting to control and reduce environmental costs. b. The firm is attempting to control and reduce environmental costs. Spending more at the prevention and appraisal stage is likely to be more than compensated by a reduction of costs at the failure stages. c. The firm is attempting to control and reduce environmental costs, and thereby maximise profits. d. An analysis of costs at each level is most likely to control and reduce environmental costs overall. e. An analysis of environmental costs is not complete unless costs at all of the given answers stages are analysed. 4.From the following list of costs, calculate the amount of contingent environmental costs. Equipment purchased to reduce emissions $200,000 Monitoring emissions $50,000 Fines for breaching environmental regulations $500,000 Estimated future costs-disposing of firm's products which contain hazardous material $550,000 Purchase of recyclable material $130,000 Clean-up costs $300,000 Estimate of potential liability-oil spill $600,000 Purchase of recyclable packaging materials $25,000 Estimate of lost business-adverse TV publicity $110,000 a. $350,000 b. $355,000 c. $110,000 d. $1,100,000 e. $550,000 5.In terms of the 'quality' framework, which of the following would be classified as a cost of prevention activity? a. Costs of supplies used in testing and monitoring. b. Depreciation-air cleaning system attached to an exhaust fan in manufacturing equipment. c. Costs of cleaning up plant following a leakage. d. Cost of cleaning up polluted sites. e. None of the given answers.

Answer 1

1. D Theory of constraints

It deals with constraints that prevent organizations from generating maximum profits.

2. E 1,3 & 4

Activity based costing, Quality framework and lifecycle costing

ABC helps to know exact cost of consumed resources and it helps to adopt cleaner production measures which cost less to environment.

Quality Framework helps in recognising costs of adopting quality measures which don't harm the environment by avoiding wastages.

Lifecycle costing helps to know various costs to the environment at different stages of the product.

3. C The firm is attempting to control and reduce environmental costs, and thereby maximise profits

The aim of incurring quality costs at initial stages is to reduce the failure costs at later stages therby increasing profits.

4. Equipment purchased to reduce emissions + Purchase of recyclable material + Purchase of recyclable packaging materials = 200000 + 130000 + 25000 = $355000

These expenses are incurred to prevent harm to the environment and contribute in saving the environment.

5. B Depreciation-air cleaning system attached to an exhaust fan in manufacturing equipment

Using air cleaning system is the cost of prevention activity as it prevents the environment from polluting due to exhaust fan in plant.

Others are expenses after loss has been done to the environment.