Lake Waburg Power Plant provides power to a metro- politan area of 4 million peo
ID: 2467255 • Letter: L
Question
Lake Waburg Power Plant provides power to a metro- politan area of 4 million people. The plant’s controller, Sunny Hope, has just returned from a conference on the Environmental Protection Agency’s regulations concerning pollution prevention. She is meeting with the company’s president, Guy Poe, to discuss the impact of the EPA’s regulations on the plant. “Guy, I’m really concerned. We haven’t been monitoring the disposal of the radioactive material we send to the Willis Disposal Plant. If Willis is disposing of our waste material improperly, we could be sued,” said Sunny. “We also haven’t been record- ing the costs of the waste as part of our product cost. Ignoring those costs will have a negative impact on our decision about the next rate hike.” “Sunny, don’t worry. I don’t think we need to concern ourselves with the waste we send to Willis. We pay the company to dispose of it. The company takes it off our hands, and it’s their responsibility to manage its disposal. As for the cost of waste disposal, I think we would have a hard time justifying a rate increase based on a requirement to record the full cost of waste as a cost of producing power. Let’s just forget about waste and its disposal as a component of our power cost. We can get our rate increase without mentioning waste disposal,” replied Guy. What responsibility for monitoring the waste disposal practices at the Willis Disposal Plant does Lake Waburg Power Plant have? Should Sunny take Guy’s advice to ignore waste disposal costs in calculating the cost of power?
Explanation / Answer
The Waburg Power Plant should have a full and complete responsibility for monitoring the waste disposal practices at the Willis Disposal Plant. The power plant is ethically and morally responsible for all the pollution that it is causing and should take the responsibility of proper disposal of the radioactive material. Although they are doing their fair bit by sending the waste radioactive material to Willis Disposal Plant, they should not stop at it. It is their moral duty to see to it that the Willis Disposal Plant is disposing off the waste material in a proper way and in a way that has been laid down by EPA's regulations. This will ensure that the waste being prodeced by the Waburg Power Plant is being disposed off in a proper manner.
Now, as far as the cost of waste is concerned, it should not be treated as an immaterial cost (as has traditionally been done by accountants). The waste cost is related to waste disposition. Waste is given to Willis Disposal Plant and costs like transportation and payment to the disposal plant will be involved. In this case, the costing system of the power plant should clearly identify and report the waste costs and these costs should be included for management decision making. They are a kind of variable cost i.e. higher the production, higher will be the waste cost. Ignoring them will lead the management to take decisions that will not be prudent. So, Sunny should not take Guy’s advice to ignore waste disposal costs in calculating the cost of power.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.