Trans Africa Airline Company is a manufacturing company of the world’s biggest air buses. By the end of the
year 2023, the environmental manager indicated that the company had made significant improvement in its
environmental performance by reducing the carbon emissions of contaminating residues of all types.
The following is the environmental cost report for the years 2022 and 2023:
| 2022
Sh.“000” | 2023
Sh.“000” |
| Sales revenue | 13,000,000 | 20,000,000 |
| Evaluating and selecting suppliers | 154,000 | 600,000 |
| Treating and disposing of toxic materials | 500,000 | 800,000 |
| Inspecting process for regulatory conformance | 450,000 | 300,000 |
| Restoration cost of carbon emissions | 1,350,000 | 1,200,000 |
| Recycling scrap cost | 550,000 | 300,000 |
| Testing for contaminants | 88,000 | 100,000 |
Required:
(i) Classify the above costs as: prevention, detection, internal failure and external failure costs.
(ii) Prepare an environmental cost of quality report for the year 2023 where costs are expressed as a
percentage of sales revenue.
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