Accounting Q&A · Cost and Management Accounting · Topic 23
Work through the questions, then reveal the answers to check your reasoning.
25 short-answer questions. Try each question before revealing its answer.
Worked example
A plant buys 1,000 kg of material at 5 per kg and loses 100 kg as waste. The waste carries 500 of material cost before disposal, energy and other assigned costs.
Core concepts
1. What is environmental management accounting?
Using physical and monetary information on environmental aspects to support internal decisions.
2. What is physical environmental information?
Measures such as kilograms of materials, cubic metres of water or kilowatt-hours of energy.
3. What is monetary environmental information?
Costs, savings and revenues associated with resource use and environmental activity.
4. Why combine physical and monetary data?
They show both what happened to resources and the financial consequence.
5. What is a material flow balance?
Reconcile inputs to outputs and inventory movements within a defined boundary.
6. What is non-product output?
Material leaving a process outside intended products, such as scrap or emissions.
7. What does material flow cost accounting do?
Assign material and related costs to product and non-product output using a defined model.
8. Why is waste cost more than the disposal charge?
Waste can include lost material, energy and production effort before disposal.
9. What is an environmental cost driver?
A factor such as waste volume or treatment hours used to explain or assign costs.
10. What is a hidden environmental cost?
A cost obscured within a broad account such as overhead or maintenance.
Worked applications
11. Inputs are 800 kg and product is 720 kg with no stock change. What is non-product output?
80 kg under the stated boundary.
12. What is material yield in that example?
90%.
13. At 4 per kg, what material cost is carried in the 80 kg loss?
320 before other costs.
14. What happens if waste disposal costs another 100?
The simple combined material loss and disposal cost is 420.
15. Electricity falls from 60,000 to 54,000 kWh. How much is saved?
6,000 kWh, a 10% reduction.
16. At 0.20 per kWh, what is the avoided energy charge?
1,200 if the unit charge applies and other tariff components do not change.
17. Production grows while total water use stays unchanged. What happens to water per unit?
It falls, assuming comparable product mix and scope.
18. Why track absolute use as well as intensity?
Intensity can improve while total use still rises.
19. What is an internal carbon price?
A planning value assigned to emissions to test decisions or allocate internal charges.
Review and exam practice
20. Do internal carbon prices automatically create financial liabilities?
They are management tools. Recognise a liability only if applicable financial reporting criteria are met.
21. What is a relevant environmental cash flow?
A future environmental cash flow that differs between the options considered.
22. Why include cleanup costs in an investment comparison?
Expected cleanup can differ by design, site or disposal choice.
23. How can double counting occur?
The same treatment or material loss may already be included in overhead or another model line.
24. What should an environmental performance comparison state?
Boundary, period, unit, data source, baseline and calculation method.
25. What is a useful month-end control?
Reconcile meter and materials records to invoices and investigate unexplained losses.