ACCA Applied Skills · Performance Management · Accounting for environmental and sustainability factors
Which of the following is an example of a hidden environmental cost that conventional accounting systems usually bury in general overheads?
Waste handling and wasted energy costs are hidden environmental costs because conventional systems absorb them into general overheads. They are not traced to the products or processes that cause them, unlike direct materials, direct labour or sales commission.
- ARaw material purchased and used in production
- BDirect labour wages for production staff
- CCosts of waste handling and energy wasted, absorbed in overheadsCorrect
- DSales commission on products sold
Explanation
Conventional systems often pool waste handling, energy and similar costs into general overheads, so they are not linked to the products or processes causing them. Raw materials, direct labour and commission are visible conventional costs.
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