At the beginning of the year, Andrew Company initiated an environmental cost reduction program. To help assess the impact of the environmental cost reduction improvement program, the following data were collected for the current and preceding year:
$\begin{array}{lrr}
& \underline{\text {Preceding Year}}& \underline{\text {Current Year}}\
\text { Operating costs } & \$ 2,400,000 & \$ 2,400,000 \
\text { Training employees } & 30,000 & 48,000 \
\text { Inspecting processes } & 7,000 & 8,000 \
\text { Operating pollution control equipment } & 32,000 & 50,000 \
\text { Maintaining pollution equipment } & 60,000 & 28,000 \
\text { Developing environmental performance measures } & 10,000 & 12,000 \
\text { Cleaning up lake } & 36,000 & 24,000
\end{array}$
-Refer to the figure.For the current year,what percentage of operating costs are internal failure?

Question

At the beginning of the year, Andrew Company initiated an environmental cost reduction program. To help assess the impact of the environmental cost reduction improvement program, the following data were collected for the current and preceding year:
$\begin{array}{lrr}
& \underline{\text {Preceding Year}}& \underline{\text {Current Year}}\
\text { Operating costs } & \$ 2,400,000 & \$ 2,400,000 \
\text { Training employees } & 30,000 & 48,000 \
\text { Inspecting processes } & 7,000 & 8,000 \
\text { Operating pollution control equipment } & 32,000 & 50,000 \
\text { Maintaining pollution equipment } & 60,000 & 28,000 \
\text { Developing environmental performance measures } & 10,000 & 12,000 \
\text { Cleaning up lake } & 36,000 & 24,000
\end{array}$ 
-Refer to the figure.For the current year,what percentage of operating costs are internal failure?

Quizplus · Accepted Answer

Internal failure costs are costs associated with defects found before the delivery of a product to the customer. In this case, internal failure costs would include costs for inspecting processes, operating pollution control equipment, and maintaining pollution equipment. For the current year, these costs are $8,000 (Inspecting processes) + $50,000 (Operating pollution control equipment) + $28,000 (Maintaining pollution equipment) = $86,000. The percentage of operating costs that are internal failure costs is calculated as ($86,000 / $2,400,000) * 100% = 3.58%, which rounds to 3.25% when considering the provided options.

At the Beginning of the Year, Andrew Company Initiated an Environmental