2nd ICAI 2022

International Conference on Automotive Industry 2022

Mladá Boleslav, Czech Republic

Allocation of environmental costs in the automotive industry Josef Horák ŠKODA AUTO University

Department of Finance and Accounting Na Karmeli 1457, Mladá Boleslav, 293 01 Czech Republic e-mail: josef.horak@savs.cz

Abstract The main aim of the submitted paper is to present ways, how to effectively allocate overhead costs with a focus on the environmental costs in the automotive industry. When the company operating in the automotive uses the outdated method of allocation of overhead costs, the final prices of its products do not correspond with the actually incurred costs and with the required margin. This situation crucially influences the market prices and demand in automotive as well. For this reason, the consumers should prefer environmentally harmful products and decrease the consumption of environmentally friendly products because the company incorrectly expressed the environmental costs on these products. Therefore, the company sells non-ecological products cheaper and ecologically friendly products more expensive in comparison with the situation when the company correctly allocated environmental costs during the production process. Keywords: analysis, automotive industry, costing, environmental costs, indirect costs JEL Classification: L2 , M4, O3 1. Introduction Nowadays, the automotive industry faces a lot of challenges and threats that influence the production process and the sale of their products all over the world. This situation has been caused by many factors such as the development of electromobility (Balali, Stegen, 2021), coronavirus pandemic, closed borders between countries, the lack of chips on the market (Pelle, Tabajdi, 2021), natural disasters, etc. All these circumstances incredibly changed the production process in the automotive industry. Suddenly, these companies had to solve many problems with insufficient shipments of material and human work. (Palazzo, Geyer, 2019) At the same time, they reported a dramatic increase in costs incurred during the production process to ensure continuous production as much as possible. In addition, many car manufacturers and their suppliers were forced to stop their production for a limited time, because they were not able to finish their final products due to missing material and other important resources. Related to the European market, the car producers must follow the European vehicle emission standards for exhaust emissions of new vehicles sold in the European Economic Area. It includes all the European Union member countries, Norway, Iceland, and

89