Environmental cost

Environmental Management Accounting is used to reduce the disposal of waste causing damage to the environment which the business should allocate environment costs to restore the waste.

Environmental cost is basically a wastage cost that results from the waste in making a particular product(s).

Methods of Accounting for Environmental costs:

1) Inflow / Outflow analysis
This approach measures how many resources were input into production with the resources that is output which is compared together to see how many resources went to waste.

2) Flow cost accounting
It measures resources input into the production to see the waste done by each three organizational structure which are divided into three categories:

– Material : resources such as raw material used in the production
– System : resources such as quality control used in the production
– Delivery & Disposal: resources such as delivery to the customers and disposing of any waste used in the production

3) Lifecycle costing
Environment costs such as disposal of waste is included in the Lifecycle costing calculations to account for them because the waste is done by the product we are producing so we should include that environmental cost to that product.

4) Environmental ABC
Environmental costs which are related to environment-related is included in the ABC calculations to account for them because the waste is done by the product we are producing so we should include that environmental cost to that product.

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