Verde Company reported operating costs of $40,000,000 as ofDecember 31, 20x5, with the following environmental costs:
| Testing for contamination | $ 440,000 |
| Inspecting products | 760,000 |
| Treating toxic waste | 1,600,000 |
| Obtaining ISO 14001 certification | 880,000 |
| Designing processes | 720,000 |
| Cleaning up oil spills | 2,880,000 |
| Maintaining pollution equipment | 1,080,000 |
| Cleaning up contaminated soil | 4,120,000 |
Required:
1. Prepare an environmental cost report,classifying costs by quality category and expressing each as apercentage of total operating costs. Round percentages to twodecimal places, if rounding is required. For example, 5.79% wouldbe entered as "5.79".
| Verde Company |
| Environmental Cost Report |
| For the Year Ended December 31, 20x5 |
| Environmental Cost | Total Environmental Cost | Percentage of Operating Costs |
| Prevention costs: | | | |
| $ | | |
| | $ | % |
| Detection costs: | | | |
| $ | | |
| | | % |
| Internal failure costs: | | | |
| $ | | |
| | | % |
| External failure costs: | | | |
| $ | | |
| | | % |
| Total quality costs | | $ | % |
2. What if Verdedeliberately did not include the cost of damaging the ecosystembecause of solid waste disposal in its environmental cost report?What is the most likely reason?
