Abstract

 The purpose of this study is to develop the Activity-based costing (ABC) model for Bachelor of Accountancy (BACC) program in University of Excellence (UoE) Malaysia. A case study approach using the professional software, ABM-SAS, and the actual expenses figure for BACC for the year 20XX were used to develop the ABC model in this study. The finding showed that the cost computed using the ABC Model is lower as compared to the cost from the traditional (current) method, i.e. RM 8,678.54 and RM 10,509.99, respectively. The differences amounted RM 1,830.55 in cost calculated by these two systems is not surprising. It is expected as many other researchers have discovered the same pattern on the lower cost of ABC as compared to the traditional method due to several reasons. Among others are, (i) the inability of the traditional costing system in spreading their costs over larger numbers of students, ii) the support services do not benefit the programmes uniformly and, iii) there were internal cross-subsidies among departments and seriously distorted if support costs were allocated based on head counts. As such, this study confirmed the ability of ABC to act in higher education institutions with the same functions as its functions in the profit and manufacturing setting.
Highlights
The substantial amount of expenditure on education faces by Higher Education Institutions (HEI) requires universities’ administrations to have a more sophisticated costing technique, like Activity-Based Costing (ABC)
The objectives of this article are threefolds: (i) to highlight the weaknesess of the traditional costing system, ii) to explain a detail steps to develop the Activity-based Costing (ABC) Model for UoE Branch A, Malaysia and iii) to compare the cost generated between these two costing systems
In HEI sector, ABC was claimed to provide more accurate cost management by its ability to calculate the ‘true‘ cost of a product (Amizawati Mohd Amir et al, 2012; Tatikonda and Tatikonda, 2001), more reliable method to report, define and capture time spent by faculty within specified activities
Summary
The substantial amount of expenditure on education faces by Higher Education Institutions (HEI) requires universities’ administrations to have a more sophisticated costing technique, like Activity-Based Costing (ABC). Several benefits of ABC in HEI were provided by Tatikonda and Tatikonda (2001), which, among others are: (i) better cost information; (ii) better distribution of scarce resources; (iii) better course and programme mix; (iv) better cost control; and (v) better public relations tool. Even though the use of ABC is rapidly gaining favour in service organisations (Khrisnan, 2006; Newman, 2003), very limited research has been done on the technical issue of the model development of ABC, in the public HEI. The objectives of this article are threefolds: (i) to highlight the weaknesess of the traditional costing system, ii) to explain a detail steps to develop the ABC Model for UoE Branch A, Malaysia and iii) to compare the cost generated between these two costing systems
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