A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry

Abstract

Issues related to global environmental protection are highly important. Under the global trend of energy saving and carbon reduction, in order to lower the carbon emissions of products or services offered by enterprises, the Taiwanese government aims to control carbon emissions by constructing a carbon tax system and mandating enterprises to pay a carbon tax. The collection of a carbon tax can minimize the total social environmental cost and increase the efficiency of carbon reduction; the need to control the green quality cost can serve as a criterion of green management decision-making. This study aimed to reorganize carbon emissions in different stages of production in order to lower the total carbon emissions of products. Activity-based costing (ABC) was adopted to assess green quality management and production cost. The optimal green quality production portfolio was selected via a mathematical programming model to focus on the expansion of productivity and outsourcing strategy in order to effectively lessen the harmful effects on the environment and maximize profits. Besides academic contributions, the findings of this study could serve as a reference to enterprises on assessing the effects of carbon emissions, carbon taxes, and environmental management on production decision-making.Green Quality Management mainly aims at eco-efficiency in the complete product life cycle, including design, raw material selection, process improvement, prevention and treatment of pollution, after-sales services and waste recycling, and processing. Quality cost measurement is the first step of quality cost management. Several researchers have proposed various methods to measure the cost of quality (COQ), which includes prevention, appraisal, internal failure, and external failure costs [4]. The Activity-Based Costing (ABC) approach has been widely used in measuring COQ [5-9] because many COQ elements are activity-related costs [9]. ABC uses a two-stage cost assignment to compute the costs of activities in the first stage and the costs of the objects in the second stage [10]. Thus, activity costs can be achieved in the first stage and sources of activity costs can be traced in the second stage of ABC cost assignment. ABC divides activities into value-added (VA) and non-value-added (NVA) activities. The purpose of green quality management is to reduce the workload of VA activities and to finally eliminate the execution of NVA activities related to COQ.The theory of constraints (TOC), proposed by Goldratt in the book titled "The Goal" [11], aims to identify the constraints and managing them. There are several constraints in business operations, and TOC uses five steps to identify and eliminate the bottlenecks one by one to increase business performance. One method is capacity expansion with a fixed capital investment to increase the possible sales and profits.Carbon taxes aim to reduce carbon emissions, and they offer a potentially cost-effective means of reducing greenhouse gas emissions [12]. Carbon taxes are also an important p...

Green Activity-Based Costing Production Decision Model for Recycled Paper

“…In this paper, it is assumed that machine capacity can be expanded to various levels, as shown in Figure 3 [50]. Assume that the current machine hours available for use are MH 0 , and the machine cost is MC 0 , i.e., the depreciation of machines.…”

Activity-Based Standard Costing Product-Mix Decision in the Future Digital Era: Green Recycling Steel-Scrap Material for Steel Industry

“…In the literature of recent years, carbon tax cost has received considerable attention in various industries such as the construction industry [3,41], the electrical and electronic industry [42], the pharmaceutical industry [43], the tire industry [44][45][46], the textile industry [47], the knitted footwear industry [48,49], the paper industry [50], the aluminum-alloy wheel industry [51], and so on. The sixth term in Equation ( 1), eec 1 * ψ 1 + eec 2 * ψ 2 + eec 3 * ψ 3 , represents the total CO 2 emission cost (i.e., carbon tax cost).…”

Modeling and Simulation of Carbon Emission-Related Issues

“…Tsai [24] proposed a green quality management decision model with carbon tax under Activity-Based Costing (ABC) in the tire manufacturing industry. The optimal green quality production portfolio can be selected via a mathematical programming model.…”