ACCA Strategic Professional · Advanced Performance Management · Sustainability

Halvern Energy uses a sustainability assessment that classifies its environmental costs into four groups: prevention, appraisal, internal failure and external failure. In the year, it spent $240,000 on staff training in pollution control, $90,000 on testing emissions, $150,000 on cleaning up a leak on its own site, and $60,000 in fines and compensation to the local community after a spill. Which statement correctly analyses these costs, and what is the total of prevention and appraisal costs?

Prevention costs of $240,000 plus appraisal costs of $90,000 total $330,000. The $150,000 on-site clean-up is an internal failure cost because the company bears it directly, while the $60,000 in fines and compensation paid to outsiders is an external failure cost.

1. APrevention and appraisal total $330,000; the clean-up is internal failure and the fines are external failureCorrect
2. BPrevention and appraisal total $390,000; the clean-up is appraisal and the fines are internal failure
3. CPrevention and appraisal total $240,000; the testing is internal failure and the fines are external failure
4. DPrevention and appraisal total $330,000; the clean-up is external failure and the fines are internal failure