Applying activity based costing method to determine environmental costs in brick manufacturing enterprises

D) Activity driver Total cost (VND) Activity for disposal of emissions, dust 870.746 24,73 749.809 18.540.200 120.937 2.990.356 Activity for disposal of waste water 384,83 85.284,02 320,69 27.349.731 64,14 5.470.117 Activity for disposal of solidwaste 56.530 943.87 48.679 45.946.456 7.851 7.410.293 Activity for using water effectively 0 0 0 0 0 0 Activity for using energy effectively 0 0 0 0 0 0 Activity for recycling industrial waste 179.521 344,41 170.046 58.565.543 9.475 3.263.285 Activity for recycling harzardous waste 0 0 0 0 0 0 Green material purchasing procurement and methods 0 0 0 0 0 0 Additional activity for supplying environmentally conscious products 0 0 0 0 0 0 Additional activity for reducing the environmental impact of containers and packaging 3.000.000 0,74 2.583.333 1.923.148 416.667 310.185 Activity for the collection, recycling, resale and proper disposal of used products 0 0 0 0 0 0 Activity for the implementation and maintenance of environmental management system 208 80.769,23 98 7.915.385 110 8.884.615 Activity for disclosure of environmental information associated with business activities and environmental advertising 16 306.291,69 8 2.450.334 8 2.450.334 Activity for monitoring environmental impact 6 750.000 3 2.250.000 3 2.250.000 207 Activity Activity driver Unit cost per activity driver (VND) Building brick Face brick Activity driver Total cost (VND) Activity driver Total cost (VND) Activity for environmental training of employees 8 450.000 4 1.800.000 4 1.800.000 Activity for environmental improvement such as nature conservation, tree planting, beautification and landscape preservation 5.266.666. 667 0,0058 4.391.666. 667 25.667.547 875.000. 000 5.114,027 R&D activity to develop products that contribute to environmental protection 70 22.857,14 35 800.000 35 800.000 R&D activity to curtail environmental impact in production stage 70 22.857,14 35 800.000 35 800.000 Another R&D activity to curtail environmental impact at the distribution stage and marketing stage of products 70 22.857,14 30 685.714 40 914.286 Activity for environmental improvement, including nature conservation, tree planting, beautification and landscape preservation 0 0 0 0 0 0 Activity related to donation or financial support of environmental groups 0 0 0 0 0 0 Activity associated with financial supprot for environmental conservation of local community 0 0 0 0 0 0 Activity to restore the natural environment back to its original state 5.266.666. 667 0,0007 4.391.666. 667 2,918,513 875.000.000 581.487 Acitivy for compensating environmental damages 51.971 320,69 16.666.580 64,14 3.333.420 Provisions or insurance fee to cover environmental incidents 5.266.666. 667 0,0004 4.391.666. 667 1.933.862 875.000.000 385.305 Total cost 216.213.012 46.757.710 Source: Brick production factory in Lam Sơn Company 208 Table 4. ABC Method and trational costing method Production ABC method (VND) Tradtional costing method (VND) Difference (VND) 1. Buliding brick 216.213.012 131.485.361 84.727.651 2. Face brick 46.757.710 131.485.361 (84.727.651) Total 262.970.722 262.970.722 - Source: Brick production factory in Lam Sơn Company 5. Conclusion Table 4 showed that in traditional costing method, buiding brick and face brick get same environmental costs. This might be an incorrect way to allocate some typical environmental costs. For example, hazardous waste disposal costs which may be high in building brick and low in face brick that applies fewer hazardous materials. In this case, the allocation of disposal costs according to trational costing method would be inaccurate. If managers use information by traditional costing method, it will reduce motivation to make decisions toward to cleaner production. In ABC method, environmental costs in building brick are more than in face brick becauses activity driver of building brick create less. Therefore, environmental costs of products in ABC method are more precise and managers in enterprises define activities which make environmental impacts more fully and correctly. As a result, they will make internal decision related to product pricing, investment, product design and technique changes. Applying ABC method require staff who have high qualify and much experience. Besides, it is required to the close connection between management accounting department and environmental management department in collecting, measuring and allocating environmental costs. Therefore, to use the method effectively, it is necessary to conduct some following suggestions: * Training management accounting and environmental management department Training not only provide the knowledge and skills to fully implement business operation but also ensure that the value of the organization is integrated into the thinking of the members. With the function of collecting, analyzing and providing environmental cost information, management accountants play a very important role in deciding the success of enterprises. Management accounting system can help to improve both financial and environmental performance. However, it is pointed out that the lack of active participation of accountants in the management of environmental activities led environmental costs not to collect and provide sufficiently and detailed. This can be explained by the limited knowledge and skills of ABC method. Therefore, to practice ABC method, it is required that management accounting department have a thorough understanding of the ABC method otherwise the collection of information may be impeded. Even if the information is collected, it can not be used 209 effectively. Raising awareness and understanding of the management accounting department on environmental management is a very important mechanism for developing ABC method in brick production enterprises. Therefore, a standard definition of environmental costs as well as the ABC method framework should be clear understood from management accountants. They also needs to consider non-traditional activities such as research on manufacturing processes and activity of treating and managing wastes in the factory. Training not only creates opportunities for interaction among members of management accounting but also facilitates the exchange of knowledge with other departments and increases the understanding of the importance of sustainable development. To help ABC application succeed, departments also have a common understanding of importance and usefulness of ABC method. Therefore, training program for all members in enterprises should be prioritized to help them better understand the link between business growth with environmental efficiency and establish a more detailed plan for ABC method practice. * Improving the connection between accounting and environmental management department Findings show that the more closely accounting department and environmental management department are connected, the higher ABC application in brick production enterprises is. Therefore, a team of professionals should be established that includes environmental managers and management accountants, cost controllers to get a complete picture of environmental performance and related environmental costs. Because environmental staff are much knowledge about environmental issues such as flow of materials, information related to treating, handling and controlling environment. However, they have little knowledge of how to reflect those issues into the accounting system. In contrast, management accounting department play an important role in accessing and analyzing data, but they often have little understanding of the environmental issues that the enterprise is facing. As a result, management accountants do not often provide environmental information for decision-making fully. 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