Required:
1.
Classify the costs as prevention, detection, internal failure, or external failure.
2.
Prepare an environmental cost report for the most recent year, where costs are expressed as a percentage of sales (instead of operating costs).
Solution:
1.
Prevention costs: Evaluating and selecting suppliers; Detection costs: Testing for contaminants and inspecting processes; Internal failure costs: Maintaining pollution equipment and treating and disposing of toxic materials; and External failure costs: Land restoration.