At the Beginning of the Year, Lombardi Company Initiated an Environmental

Multiple Choice

At the beginning of the year, Lombardi Company initiated an environmental cost reduction program. To help assess the impact of the environmental cost reduction improvement program, the following data was collected for the current and preceding year: $\begin{array}{lrr}&\text { Freceding Year }&\text { Current Year }\\\text { Operating costs } & \$ 4,500,000 & \$ 4,500,000 \\\text { Designing products } & 3,000 & 4,500 \\\text { Auditing environmental activities } & 7,500 & 12,000 \\\text { Recycling scrap } & 60,000 & 45,000 \\\text { Disposing of toxic waste } & 120,000 & 75,000 \\\text { Testing for contamination } & 15,000 & 30,000 \\\text { Cleaning up oil spills } & 105,000 & 82,500\end{array}$ For the current year, external failure costs are what percentage of operating costs?

A) 2.67%
B) 1.83%
C) 1.38%
D) 0.93%