Deck 17: Sustainability and Management Accounting

Question 1

Which of the following would not be classified as environmentally induced revenues?

A) Higher profit contributions resulting from producing greener products.
B) Higher profit contribution resulting from being able to charge higher prices for environmentally friendly products.
C) Revenue from the sale of recyclable material.
D) None of the given answers.

Answer 1

D

Question 2

An example of a hidden environmental cost is:

A) monitoring costs
B) provisions for potential oil-spill cleanup
C) when a firm produces a product that is difficult to dispose of safely
D) equipment to prevent environmental damage

Answer 2

A

Question 3

Which of the following costs is included in the five tiers of environmental costs?

A) Conventional
B) External
C) Internal
D) Conversion

Answer 3

A

Question 4

Which of the following illustrate how environmental management accounting (EMA)assists managers to manage resources more effectively?

A) EMA makes managers more accountable.
B) Managers forced to identify costs of disposing of waste will consider cost reduction alternatives such as reprocessing waste.
C) EMA allows the inclusion of both financial and non-financial environmental data in the firm's management information system.
D) EMA highlights both private and public environmental costs.

Question 5

Which of the following costs is included in the five tiers of environmental costs?

A) External
B) Preventive
C) Societal
D) Conversion

Question 6

Which of the following represents the environmental management accounting response to product costing,as compared with the traditional view on recording environmental costs?

A) Environmental costs are spread across all processes and production.
B) Environmental costs are not explicitly recorded in the accounts.
C) Environmental costs are traced to individual products or processes causing the costs.
D) Environmental costs are upstream or downstream costs and therefore not included in product costs.

Question 7

Which of the following statements about environmental management accounting (EMA)is incorrect?

A) EMA analyses environmental costs for use by the firm's internal decision-makers.
B) EMA does not usually include external environmental costs.
C) EMA does not usually include external environmental costs for which the firm is not accountable.
D) EMA when combined with triple bottom line reports includes external costs.

Question 8

How does environmental management accounting (EMA)differ from traditional management accounting?

A) EMA focuses on non-financial rather than financial information.
B) EMA includes environmental cost data in addition to traditional product cost data in the firm's management information system.
C) EMA focuses on external costs to society rather than internal cost data.
D) EMA is a reactive costing technique whereas traditional product costing is proactive.

Question 9

An example of a conventional environmental cost is:

A) equipment to prevent environmental damage
B) provision for potential oil-spill cleanup
C) when a firm produces a product that is difficult to dispose of safely
D) lost business because of adverse television publicity

Question 10

Management accounting techniques that feature in environmental management accounting include:

A) environmental performance measures
B) life-cycle costing
C) environmental variance analysis
D) environmental performance measures AND life-cycle costing

Question 11

Which of the following reasons,explaining the difficulty of reporting,is peculiar to environmental and social impacts? (In other words,which of the explanations is an issue relating to environmental and social costs,but not related to other costing issues faced by firms?)

A) Future ecological and social issues are not yet known.
B) Many costs and benefits are external (they occur outside the organisation).
C) Many costs and benefits are difficult to quantify.
D) None of the given answers.

Question 12

Which of the following costs is included in the five tiers of environmental costs?

A) Contingent
B) Private
C) External
D) Period

Question 13

Which of the following costs is included in the five tiers of environmental costs?

A) Conversion
B) Abnormal spoilage
C) Private
D) Relationship and image

Question 14

The major purpose of setting environmental performance indicators is to enable managers to:

A) improve profitability by reducing environmental costs
B) improve environmental performance by setting environmental targets and monitoring their effectiveness in meeting those targets
C) establish both financial and non-financial measures of performance
D) improve environmental performance by monitoring management's efficiency in relationship to environmental targets

Question 15

Which of the following costs is included in the five tiers of environmental costs?

A) External
B) Prime
C) Hidden
D) Conversion

Question 16

An example of a societal environmental cost is:

A) monitoring costs
B) provisions for potential oil-spill cleanup
C) when a firm produces a product that is difficult to dispose of safely
D) buying equipment to prevent environmental damage

Question 17

From the following list of environmental costs,which is the most difficult to include in an environmental management accounting system?

A) Costs to pay for breaches of environmental rules
B) Costs on society generally,resulting from the firm's environmental breaches
C) Environmental reporting costs
D) Costs to monitor the environmental impacts of the firm's actions

Question 18

Reports to stakeholders of a firm's performance on environmental and social issues (sustainability)are called:

A) social audits
B) environmental reports
C) triple bottom line reports
D) All of the given answers

Question 19

Which of the following statements is correct about the inclusion of environmental costs in the firm's management accounting system?

A) Firms using environmental management accounting (EMA)tend to make environmental costs more visible than firms not using EMA.
B) Firms not using EMA may incur environmental costs,but these are often hidden in overhead accounts.
C) Firms using EMA may choose to report narrowly (only on costs that affect profits),or more broadly include costs on the external environment caused by the firm's activities.
D) All of the given answers

Question 20

While environmental management accounting (EMA)imposes costs on firms,there are significant benefits.These benefits include:

A) enhancing the firm's reputation in the community
B) enabling the inclusion of both financial and non-financial data in the firm's management information system
C) reducing the risk of future litigation for breaching environmental laws
D) enhancing the firm's reputation in the community AND reducing the risk of future litigation for breaching environmental laws

Question 21

In terms of the 'quality' framework,which of the following would be classified as a cost of internal failure activities?

A) Cost of employee training
B) Depreciation of testing equipment
C) Fines for environmental damage
D) Costs of occupational health and safety claims

Question 22

The following is a list of the five tiers of environmental costs.Which of them are described as 'private costs'?
I)Conventional
Ii)Hidden
Iii)Contingent
Iv)Relationship and image
V)Societal

A) i and ii
B) i,ii and iii
C) i,ii,iii and iv
D) All of the given answers

Question 23

From the following list,calculate the total of environmental external failure costs.

A) $600 000
B) $650 000
C) $660 000
D) $620 000

Question 24

From the following list,calculate the total of environmental appraisal costs.

A) $75 000
B) $80 000
C) $60 000
D) $70 000

Question 25

An example of a contingent environmental cost is:

A) provisions for potential oil-spill cleanup
B) when a firm produces a product that is difficult to dispose of safely
C) lost business because of adverse television publicity
D) equipment to prevent environmental damage

Question 26

Which of the following types of environmental costs is the most difficult to quantify?

A) External failure
B) Internal failure
C) Prevention
D) Appraisal

Question 27

From the following,calculate the amount of relationship and image environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 28

Why are Tier-2 costs called 'hidden' environmental costs?

A) They are hidden in the accounts so that stakeholders are unaware of the potential environmental risks of the firm.
B) They tend to be included in other accounts such as overhead,and therefore are not easily identifiable.
C) They are uncertain because it is not possible to show them in a separate account.
D) Environmental costs cannot be estimated with any degree of certainty.

Question 29

In terms of the 'quality' framework,which of the following would be classified as a cost of appraisal activities?

A) Monitoring of air pollution levels from the factory
B) Auditing environmental risks
C) Costs of occupational health and safety claims
D) Losses associated with loss of reputation due to public awareness of the firm's non-environmentally friendly activities

Question 30

From the following list,calculate the total of environmental internal failure costs.

A) $45 000
B) $40 000
C) $145 000
D) $140 000

Question 31

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) An analysis of costs at each level is most likely to control and reduce environmental costs overall.
D) An analysis of environmental costs is not complete unless costs at all of the given stages are analysed.

Question 32

From the following list of costs,calculate the amount of conventional environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 33

From the following list of costs,calculate the amount of hidden environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 34

From the following list,calculate the total of environmental prevention costs.

A) $225 000
B) $150 000
C) $175 000
D) $255 000

Question 35

In terms of the 'quality' framework,which of the following would be classified as a cost of external failure activities?

A) Recycling of packaging materials from suppliers
B) Inspecting processes and products
C) Loss of future sales due to public awareness of the firm's non-environmentally friendly activities
D) Cost of cleaning up plant interior following a chemical spillage

Question 36

From the following list of costs,calculate the amount of societal environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 37

An example of a relationship and image environmental cost is:

A) monitoring costs
B) provisions for potential oil-spill cleanup
C) when a firm produces a product that is difficult to dispose of safely
D) lost business because of adverse television publicity

Question 38

Private environmental costs are:

A) environmental costs that directly affect the profit of the organisation
B) environmental costs for which the organisation can be held legally accountable
C) environmental costs that can be quantitatively measured
D) Both A and B

Question 39

In terms of the 'quality' framework,which of the following would be classified as a cost of prevention activity?

A) Cost of supplies used in testing and monitoring.
B) Depreciation-air-cleaning system attached to an exhaust fan in manufacturing equipment.
C) Cost of cleaning up plant following a leakage.
D) Cost of cleaning up polluted sites.

Question 40

From the following list of costs,calculate the amount of contingent environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $1 100 000

Question 41

Which of the following environmental issues need to be accounted for in decision making?

A) The decision making will be flawed if environmental costs that differ between alternatives are not considered.
B) It is possible that a capital investment project will be financial superior but not environmentally superior.
C) Environmental costs are both positive (proactive)and negative (e.g.fines).
D) The decision making will be flawed if environmental costs that differ between alternatives are not considered AND it is possible that a capital investment project will be financial superior but not environmentally superior.

Question 42

Which of the following statements is correct?

A) Eco-intensity measures measure the relationship of output to input.
B) Eco-intensity measures measure the relationship of input to output.
C) Eco-efficiency is another term for eco-intensity.
D) Eco-efficiency measures are measures of productivity.

Question 43

In what way is activity based costing (ABC)particularly helpful for management seeking to control environmental costs?

A) ABC focuses on cost drivers that are more closely related to the incurrence of costs.
B) Because ABC is a relatively recent technique;it is more likely to be useful to managers in today's society,which has recently become environmentally aware.
C) ABC focuses on activities that cause costs and selects volume-related cost drivers to allocate those costs to products.
D) ABC focuses on activities that cause costs and this focus enables managers to see how environmental costs are generated,and therefore control and reduce them.

Question 44

Which of the following is a performance indicator for social performance?

A) Percentage of suppliers who have undergone screening on human rights policies
B) Carbon emission reduction
C) Revenue growth in local markets
D) Percentage of materials used that are recycled

Question 45

Why is the inclusion of 'environmental performance' likely to become more common in a firm's balanced scorecard?

A) Balanced scorecard must include all stakeholder interests to be complete.
B) It is likely that environmental sustainability is one of a firm's strategic priorities.
C) Balanced scorecard acknowledges that it is no longer adequate to focus on the major stakeholder (the firm's owner(s)).
D) Balanced scorecard acknowledges that numerous stakeholders are important for business success.

Question 46

Under ISO14031,which of the following is an operational performance indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 47

The 'inside-out approach' of measuring sustainability performance refers to:

A) Develop several key lead indicators first,then for each lead indicator managers can derive a number of lag indicators.
B) Develop several key lag indicators first,then for each lag indicator managers can derive a number of lead indicators.
C) Develop measures from within the business,then these measures are 'fed through' to external reporting.
D) Measures are determined externally by outside forces e.g.government regulations,these measures then influence the development of internal measures.

Question 48

Under ISO14031,which of the following is a management performance indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 49

Which of the following is an example of a 'remediation' environmental cost?

A) Inspecting waste-handling procedures
B) Clean-up costs (both on- and off-site)
C) Staff training-waste reduction techniques
D) Improving production design to reduce toxic waste

Question 50

Because environmental issues span the extended value chain of the firm,environmental management accounting uses supply chain management by:

A) identifying and using environmentally sensitive suppliers
B) assisting customers with environmentally sensitive disposal of the firm's goods
C) considering cost savings by using customer profitability analysis
D) identifying and using environmentally sensitive suppliers AND assisting customers with environmentally sensitive disposal of the firm's goods

Question 51

The 'outside-in approach' of measuring sustainability performance refers to:

A) Develop several key lead indicators first,then for each lead indicator managers can derive a number of lag indicators.
B) Develop several key lag indicators first,then for each lag indicator managers can derive a number of lead indicators.
C) Develop measures from within the business,then these measures are 'fed through' to external reporting
D) Measures are determined externally by outside forces e.g.government regulations,these measures then influence the development of internal measures.

Question 52

Which of the following statements about traditional management accounting systems is true?

A) Where environmental costs exist,it is common to find some reporting of environmental costs at the lower levels (tiers 1 and 2).
B) Where environmental costs exist,there is very little reporting of environmental costs at the lower levels (tiers 1 and 2).
C) Where environmental costs exist,there is very little reporting of environmental costs at the higher levels (tiers 3,4 and 5).
D) Where environmental costs exist,it is common to find some reporting of environmental costs at the lower levels (tiers 1 and 2)AND where environmental costs exist,there is very little reporting of environmental costs at the higher levels (tiers 3,4 and 5).

Question 53

The international standard of environmental performance indicators include:

A) operational performance,community satisfaction indicators and employee performance indicators
B) employee performance indicators,management performance and environmental condition indicators
C) operational performance,management performance and environmental condition indicators
D) management performance,supplier rating indicators and community satisfaction indicators

Question 54

Which of the following management accounting techniques are likely to be employed for decision making in an environmental management accounting system?
I)Capital investment decisions
Ii)Business process re-engineering
Iii)Service department allocations
Iv)Balanced scorecard
V)Make and buy decisions

A) i,ii and iii
B) i,ii and iv
C) i,ii,iv and v
D) All of the given answers

Question 55

From the following list of management accounting techniques and/or frameworks,which of them are employed to measure and analyse environmental costs?
I)Activity-based costing
Ii)Just-in-time inventory systems
Iii)Quality framework
Iv)Life-cycle costing
V)Customer profitability analysis

A) i,iii and iv
B) i and iii
C) i,ii and iii
D) All of the given answers

Question 56

Under ISO14031,which of the following is an environmental condition indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 57

Climate change entails many potential costs to businesses.One example is the cost of collecting information about carbon emissions for the purpose of external accreditation.Based on the EPA framework,this is an example of:

A) Tier 1 cost
B) Tier 2 cost
C) Tier 3 cost
D) Tier 4 cost

Question 58

Which of the following is not a good reason for adding a sustainability perspective on the BSC?

A) Sustainability is considered part of the company's core strategy.
B) Sustainability impacts can be captured by the existing four perspectives of the balanced scorecard.
C) Sustainability is likely to impact on the company's reputation.
D) Resources allocated to sustainability issues by top management are large.

Question 59

How do environmental issues relate to the strategic decisions of the firm?

A) Including environmental costs in business decisions recognises the high cost to the firm of environmentally irresponsible actions.
B) In the planning phase,firms should identify those managers responsible for environmental costs.
C) Environmental risk should be included in the risk assessment of the firm.
D) Socially responsible firms will set stringent environmental targets,and measure management performance against those targets.

Question 60

Which of the following is an example of a 'monitoring' environmental cost?

A) Inspecting waste-handling procedures
B) Clean-up costs (both on- and off-site)
C) Staff training-waste reduction techniques
D) Improving production design to reduce toxic waste

Question 61

Unfortunately,because the costs of climate change cannot be classified easily into the current five tiers of environmental costs many firms may find it difficult to reduce these costs.

Question 62

Despite the costs involved,measuring environmental and social impacts (sustainability)can provide useful information to assist a firm to achieve a competitive advantage.

Question 63

Which of the following statements about the cost of climate change and carbon accounting is incorrect?

A) A carbon tax effectively converts some of the Tier 5 costs (based on the EPA framework)into Tier 1 costs.
B) The cost of climate change is relevant to the retail industry.
C) Direct emissions resulting from the production process of a business falls under 'Scope 1' category of measurement.
D) Carbon emissions relating to the transportation of purchased materials falls under 'Scope 2' category of measurement.

Question 64

Sustainability costs essentially consist of those costs that can be measured,like costs to minimise gas emissions,and costs that are forgotten such as costs to customers of disposing of unwanted packaging.

Question 65

Management accountants are rapidly moving towards a system of not only identifying cost drivers,but also identifying carbon drivers in an effort to work efficiently within the carbon-constrained environment of this decade.

Question 66

Climate change entails many potential costs to businesses.One example is the cost of collecting information about carbon emissions for the purpose of external accreditation.Based on the 'quality cost' mode,this is an example of:

A) Prevention cost
B) Appraisal cost
C) Internal failure cost
D) External failure cost

Question 67

Management performance indicators such as the number of cases of non-compliance with regulations,measure the efforts of management to improve the environmental performance of the organisation.

Question 68

The need to conform to legal regulations is the only reason firms are currently adopting a sustainability approach.

Question 69

Environmental management accounting can be further classified into financial,physical and social.

Question 70

Just as stakeholders have an interest in a company's performance,this same group of stakeholders also have an influence over an organisation's environmental and social practices.

Question 71

Intangible benefits associated with environmental sustainability activities are always quite easy to quantify.