Spectrum Glass faces environmental costs when disposing of "fines" (ash) contaminated with cadmium. Cadmium is used only in the manufacture of warm colors, but the continuous manufacturing process mixes fines from all colors together. Traditional cost accounting systems do not allocate disposal costs to the product line that generates them. As a result, some products look more expensive then they really are, while others look less expensive. In class, we look at how an activity based costing system can be used to avoid this cost distortion.
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