BS Accountancy 5
Written Analysis of the Case
I. Problem Statement
What is the best way of minimizing the waste released by Cosmos Corporation’s plant facility?
1. To determine the effect on company’s Profit After Taxes of installing waste neutralizers for the fiscal year. 2. To determine the effect on the finances of Cosmos Corporation this year of locating the plant somewhere else if it will refuse installing the waste treatment equipment.
III. Areas of Consideration
The Agreement between the City of Makati and Cosmos Corporation
Cosmos Corporation promised a year-round employment of at least 500 employees from the city. In return the city: sold a land worth Php180,000,000 where the plant will be built, constructed the plant according to specifications with the company repaying the cost in equal monthly payments for a 12-year period with 6.5% on unpaid balance, and will not collect property taxes for 10 years.
The Makati City Development Plan
The city government has a plan building a park and requests the Cosmos Corporation to install special chemical equipment to neutralize the waste discharged by the plant.
This waste treatment requested by the city government will cost the company around Php7,500,000 for the equipment and an annual operating costs of Php500,000.
The Contention of Cosmos Corporation
The Company President argued that they cannot afford such waste treatment and that the requirements for locating their plant in Makati did not contain a clause for putting up a waste treatment facility. The company also complied with the other requirements set by the city government like the monthly payments and providing employment for the people. The president pointed out that the plant is built specially for the company’s particular type of chemical manufacturing. If they will abandon this and move to other location...