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Activity‐based costing in UK universities

a
Mike Mitchell
a
School of Business , Oxford Brookes University
Published online: 07 Jan 2009.

To cite this article: Mike Mitchell (1996) Activity‐based costing in UK universities, Public Money & Management,
16:1, 51-57, DOI: 10.1080/09540969609387909

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 51

Activity-Based Costing in UK
Universities
Mike Mitchell
This article describes the results of a survey of the usage of Activity-Based Costing
(ABC) in UK universities in Autumn 1994. One-fifth of the respondents had
made use of this costing method, and were overwhelmingly positive about its
benefits, in particular its value in improving cost-awareness in the organization.
Perhaps the most interesting result of the survey was that most institutions viewed
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ABC as a tool for rational allocation of central costs to academic departments,

whereas the usual rationale for ABC (outside universities) is in terms of product
costing. The article concludes with a discussion of the implications of financial
devolution on the use of these methods.
Most financial guidance to universities (for
example Carr, 1994) stresses the need for rational
costing of courses and other programmes, and in
particular supports the use of the method known
as Activity-Based Costing (ABC). ABC approaches
the problem of allocating central costs (for example
the library) by focusing on the activities that take
place (for example processing loans) and their
relationship to 'driver' variables (for example
number of graduate students).
While ABC is theoretically attractive, and in
some practical circumstances has proved to be
beneficial, particularly in manufacturing
organizations, certain difficulties arise in its
implementation in a university. An example of
these difficulties is how to reconcile an essentially
centralist view of cost in ABC with an increasing
move to devolution within institutions (see
Howson and Mitchell, 1995). While these
difficulties may arise to a greater or lesser degree
in other organizations, the university sector
provides a unique context for such difficulties.
This article describes the results of a survey of
ABC usage in UK universities in the Autumn of
1994. The primary objective of this survey was to
clarify the possible benefits and weaknesses in the
implementation of ABC methods in a university
context. This would come both from lessons
learned by users of ABC, and from reasons for
avoiding ABC given by non-users. The latter
follows the spirit (rather than some of the
contentious detail) of Positive Accounting Theory
(for example Watts and Zimmerman, 1986), which
contends that lack of use of theoretically-based
advice may be an indicator of weakness in the
theory. Because of the wide geographic dispersion,
the method chosen was a postal questionnaire.
Universities world-wide share common
functionality, although many national differences
exist. Because of relatively recent changes,
however, the UK sector now presents within itself
a very diverse set of institutions, so the survey Mike Mitchell is in the
results should be of value in an international School of Business at
context, albeit that elsewhere other national- Oxford Brookes
specific issues may arise. University. He teaches
One concern in the survey design was what a information systems and
respondent might interpret by the expression researches university cost
'ABC. Although it has a specific meaning, as in issues.
for example Kaplan (1994), it has to some extent
become popularized as a 'buzz-word', and on
occasion it has been used to describe allocation
systems that simply use multiple drivers or
allocation bases, even where no activity analysis
has taken place. To resolve this, questions were
included as to the specific drivers used in
allocations. A large range of drivers, or the
inclusion of sophisticated drivers, would indicate
a thorough ABC analysis, whereas a small range
of simply-defined drivers (for example students,
What is ABC?
It is common to determine the average cost of a product by
identifying any 'direct' costs, and then allocating the remaining
'overhead' costs on simple basis linked to the product, for example
by a percentage applied to direct costs. When overhead costs are
significant, this can lead to serious distortions in the product cost.
Activity-based costing (ABC) is an approach to overhead allocation
that determines:
•The activities that are taking place in the overhead department.
• How these activities consume resources.
•What causes the activities to be needed (the cost drivers).
Proponents of the method would say that ABC allocations more
fairly reflect the use of resources and thus are better, for example
when comparing with prices charged. Equally important, they
would say, is that the information can also be used to direct
management attention to the causes of cost.

© CIPFA, 1996 PUBLIC MONEY & MANAGEMENT JANUARY-MARCH 1 9 9 6

 52
Table 1. Analysis of non-ABC respondents.
Category 1 2 3 4
Worthwhile? No Maybe Yes Yes
Actioning? No No No Yes
Central allocation? Y 10 4 11 3 28
N 7 1 11 1 20
Considered ABC? Y 10 1 22 4 37
N 7 4 0 0 11
Total 17 5 22 4 48
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staff, and premises space) would indicate a more
traditional allocation exercise.
The survey questionnaires were mailed in
October 1994 to the finance directors of 100
university institutions, covering all universities
and also a few large university colleges, and
eventually generated 64 responses.
There were two sets of responses depending
on whether or not the institution had carried out
an ABC exercise. These sets will be referred to as
the ABC set and the non-ABC set. Allocations
from central departments were to faculties,
schools, or academic departments, sometimes
with a two-level faculty/department structure.
This variation made no real difference to the
responses or analysis, and 'school' is used in this
article to refer to any of these organizational
forms.
Analysis of the Non-ABC Responses
The analysis of the non-ABC set (those
respondents who had not used ABC) started with
an examination of all responses, identifying all
issues or views raised. It became clear from this
initial review that although there was immense
variety in the views/issues expressed, they varied
largely due to the overall stance taken towards
ABC methods.
The responses were therefore re-examined
so as to categorize the stance taken towards ABC
methods, with the following main categories
identified (with the number of institutions shown
in each category):
1. Not worthwhile (17 institutions). Firm views
that ABC methods were unnecessary and/or
inappropriate.
2. Possibly worthwhile (5). Not sure of value of
ABC, reservingjudgement.
3. Useful but not actioning (22). Firm views that
ABC methods are useful, but no immediate
plans to carry out an exercise.
4. Useful and actioning (4). Firm views that ABC
methods are useful, and planning an exercise.
Two specific yes/no responses were requested
PUBLIC MONEY & MANAGEMENT JANUARY-MARCH 1 9 9 6
from the non-ABC respondents:
•Central allocation: Do you have any form of
central cost allocation to schools?
•Considered ABC: Have you considered using
ABC methods?
The latter question was intended simply to ask
whether any form of consideration or thought
had been given to using ABC. Some respondents
apparently interpreted this very strictly, in effect
treating a positive answer as implying in-depth
analysis. In a few cases therefore, where a 'no' was
given, but where the following comment 5 indicated
that there had been some consideration, the
response was treated as a 'yes'.
The responses to these two questions, by
categories 1 to 4 above are shown in table 1.
It can be seen that 26 of the 48 overall (i.e.
more than half) had positive views about ABC (i.e.
were in categories 3 and 4). It is perhaps i nteresting
to note that of those 37 who have considered
using ABC, 26 have positive views (well over two-
thirds). It might reasonably be conjectured
therefore that many of the 11 who have not yet
considered ABC might 'convert' to positive views
once they do give the method consideration.
The non-ABC responses were then re-
examined, to identify the main views and issues
within each category, with results as follows. (Totals
do not always match, due to multiple issues being
mentioned in some responses.)
Category 1—Not Worthwhile
There were 10 responses which viewed ABC
methods as unnecessary, largely due to sa tisfaction
with current systems. There were eight responses
which viewed ABC methods as inappropriate,
largely because of their complexity. The concern
about complexity occurs in other categories of
response, and is partly a concern about the
difficulty and cost of the exercise, and partly the
difficulty of getting acceptance by the non-financial
community.
Category 2—Possibly Worthwhile
An interesting comment was the desire to see
practical evidence of benefits. It is true that there
is little in the way of such published evidence in
the university context, and this could therefore
be an underlying reason for the lack of interest in
the methods by the category 1 responden ts, seven
of whom had not considered ABC methods.
Category 3—Useful but Not Actioning
Although there was a variety of responses given to
issues/views, the responses fell broadly into these
general reasons for not actioning an ABC exercise:
•Lack of staff resources, related to the expected
time and cost of a full exercise (12 responses).
• Difficulty in getting others to understanci/accept/
co-operate, in particular academic staff (seven
responses).
©CIPFA, 1996

• Difficulty in doing it, in particular with allocating
staff time among activities (four responses).
Category 4—Useful and Actioning
The concerns here mirrored the problems faced
by category 3 respondents, in that although these
universities were proceeding with ABC exercises,
there were concerns over lack of staff resources
and co-operation of university staff.
Analysis of the ABC Responses
The ABC set of respondents were those who said
that they had carried out an ABC exercise. The
first scan of the 16 institutions in the ABC set
indicated that there was a spectrum in terms of
the degree of sophistication used, so responses
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were reviewed so as to categorize according to the
level of sophistication of activity analysis.
Category 1: Low Sophistication (No Significant Activity
Analysis)
The first category included four institutions that
had implemented reasonably sophisticated cost-
allocation schemes from central departments to
schools, but had not carried out any significant
activity analysis. The University of Manchester is
typical of these. The University, in its survey
response, and in Scapens et al. (1994) makes it
quite clear that although ABC was given
consideration, the final system is not a true ABC
system. It appears that some other respondents
are in this category, in that these had not
implemented ABC methods in the sense of
performing detailed activity analysis, and were
relying on relatively few and unsophisticated
allocation bases. The views expressed in this
category are therefore treated as the views of non-
ABC users.
Category 2: Medium Sophistication
This category included seven institutions where
there was some evidence of use of activity analysis.
This was indicated by comments made, or by the
use of many drivers or sophisticated drivers, for
example the inclusion of both the number of
students and the number of weighted students.
Category 3: High Sophistication
This category, with five institutions, showed
evidence of intensive use of activity analysis, with
many sophisticated drivers, and with sophisticated
commentary on what was done.
In the remainder of this analysis, comments relate
only to the 12 institutions in categories 2 and 3,
i.e. with medium/high sophistication of ABC
methods. The next scan of the responses was to
obtain a broad picture of the types of response,
and to facilitate some categorization of replies.
The responses to questions were as follows:
•What were the objectives of the ABC exercise?
Of the 10 responses with clearly stated
objectives, six saw the objective as being to
© C1PFA, 1996
53
allocate overheads to schools, mostly to establish
the surplus/deficit associated with each school,
but also in some cases as a means of resource
allocation. Only two of the 10 saw a key objective
in terms of product decisions at the level of
courses, with two more seeing objectives in
terms of broad programme costing (for
example teaching versus research).
•Allocation of central costs was down to what
level? Nearly all respondents allocated directly
only to schools, in line with the stated objectives
discussed above. Of the 10 that clearly stated
their allocation method, only one allocated
central costs directly to course level. The other
nine allocated central costs to schools (six of
these then allocated from schools to a lower
level, losing some of the detail of the original
allocations from the centre).
•What cost drivers did you identify for central
costs (library etc.)? A variety of cost drivers was
mentioned in the survey, although most
responses gave examples rather than full lists.
The drivers most commonly quoted were
number of students, number of staff, and space
occupied. It was not always clear whether
'number' was simply a headcount, or some
weighted or full-time equivalent (FTE) figure,
but some respondents made clear that they
used both headcount and weighted figures for
students and staff. The other drivers quoted
included, for example, numbers of courses,
computer log-ins, library usage statistics,
Table. 2. Benefits and problems of ABC.
Main benefits noted No. of responses
Improved awareness/knowledge/
understanding of costs 6
(This included in particular the improved
understanding by schools.)
More rational/equitable allocation to schools 4
(This included mention that it is seen as fairer
than top-slicing, and leads to a more equitable
distribution of resources)
Central services more accountable 3
(In particular, this involved schools
questioning the levels of central cost
and the quality of services.)
Aids decision making 2
Main problems noted No. of responses
Agreeing drivers 3
(This included agreement on the number of
drivers as well as the types of driver used)
Time and cost of exercise 2
Lack of understanding of methods 2
(This included mention of the need to
educate schools)
PUBLIC MONEY & MANAGEMENT JANUARY-MARCH 1 9 9 6
 54
financial transactions, undergraduate
applications, room bookings, and various forms
of income.
• Were there any central costs without identifiable
drivers (i.e. fixed or core costs)? Of the 10 with
clear responses, eight said yes, often providing
examples, all of which included 'central
management' or some similar expression. As
far as one could tell from the responses, all
these core costs were then allocated to schools
by non-ABC methods, using some agreed base
linked to the size of the school (staff, students,
revenues etc.).
•Was the exercise worthwhile? Eleven of the 12
respondents thought that it was worthwhile,
with one reservingjudgement. A wide range of
benefits was mentioned, in particular the
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greater understanding and awareness of cost
within the university. A wide range of problems
was also mentioned. Overall, respondents had
positive views, but these were sometimes
tempered with caution. The main benefits and
problems noted (where at least two institutions
shared the view) are shown in table 2.
Discussion of Results: Non-ABC
Respondents
These respondents demonstrated an over-arching
concern about complexity. This showed itself as
three specific concerns, which were either blocking
consideration of an ABC exercise, or were blocking
the carrying out of an exercise:
•Concern 1: The time and cost of doing the
exercise, in particular within existing staff
resources.
•Concern 2: The difficulty in getting others
(especially academics) to understand the
methods, to accept them, and to co-operate.
• Concern 3: The difficulty in carrying out activity
analysis, especially analysing staff time.
We have to ask whether these indicate particular
weaknesses of the ABC method in higher
education. Compared to existing methods in HE,
which usually have very simplistic allocation
methods (if any at all are used), then the
respondents are correct in their perception of
complexity. So although these concerns are not
specific to universities, and are general issues of
implementation of ABC, they may have special
significance when related to the current
organization and culture of universities.
Where there might be significance relative to
the first concern is in the scale of time and cost of
the ABC exercise relative to the scale of the
organization as a whole. In a university with
revenues of £20M, the question is whether the
complexity of operations (and therefore of the
ABC exercise) is much greater than that of a
commercial organization with similar revenues.
If so, then the costs of the ABC exercise are
perhaps higher in universities relative to the
benefits to be gained.
PUBLIC MONEY 8c MANAGEMENT JANUARY-MARCH 1 9 9 6
A further specific issue for universities relates
to the second concern, that of getting others to
understand, accept and co-operate. Changes in
university culture associated with market
orientation, competition for funds, and so on,
mean that the roles of academics an: shifting
towards a greater commercial orientation. All the
same, the role of a senior academic is stil I far from
that of a manager in a commercial organization.
The senior academic usually is appointed on the
basis of research record, academic leadership,
and so on, and there may be little or no
understanding of budgeting, cost control, or
product costing; in fact the terms 'product' and
'customer' may have little meaning to some
academics in the context of their own activities. If
this is a weakness of ABC in current circumstances,
then it may be expected to diminish over time, as
academics gradually get exposure to other
accounting processes (for example full costing of
research contracts).
Those respondents who said that they had no
intention of using ABC generally took tMs view
because AB C methods were viewed as unnecessary
or inappropriate. Where a university is static
year-on-year, without a sense of market pressure,
it is probably true that change-oriented
approaches like ABC serve little purpose. For
example if policy dictates that the product mix is
to be kept fixed, then there is no point to the
concept of optimizing product mix. If the
increasing commercialization and interest in
efficiency gains proceed as they have done in the
early 1990s, then these static organizations may
convert to a more market-responsive approach,
and thus take greater interest in ABC.
A particularly interesting concern exp ressed
was that an excessive focus on costing methodology
might be at the expense of discussion on the
business issues raised. The point of ABC as a
management accounting method is to provide
information which in the end leads to better
decisions, in particular in terms of resource
utilization. There is of course a real risk that ill-
chosen methods cause instead a waste of (staff)
resources in interminable debates about the
methodology itself. Kaplan and Atkinson (1989)
(p. 247) discuss this problem, concluding that a
key to avoiding non-productive debate on
allocation rates and methods is to use clearly
identifiable quantity measures. When managers
are faced with such clear allocation bases, and
where the manager has some form of control over
the quantity (for example usage of a resource),
then managers respond as desired to achieving
efficient usage; where the measures are imprecise
and not evidently controllable, then managers
respond instead by arguing about methods, and
unit charges.
Discussion of Results: ABC
Respondents
Perhaps the most important results of the survey
of these 12 respondents was in terms of the stated
C C I P F / , 1996

objectives of the exercise and the objects to which
central costs were allocated using the ABC
methods. The majority saw the objective as being
to allocate overheads to schools, with only a
minority concerned with the costing of courses.
This is interesting in that the dominant objective
expressed in the ABC literature is that of product
costing (leading to product-related decisions),
with allocation from central services to
'production' departments as a step in the process,
rather than an end in itself.
The majority also allocated to school level,
rather than directly to courses, in line with these
objectives. This perhaps suggests an important
distinction between universities and other
organizations, in that the central finance function
tends to treat the schools as 'black boxes', with
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little or no view of the activities within these
boxes. In a manufacturing organization, the
finance director would be very much concerned
with product profitability and product decisions,
for example receiving regular printouts with
product-level detail. In a university, it would
appear to be rare to find a finance director
examining costs and revenues on a course-by-
course basis.
If a major benefit of ABC is in terms of
product decisions, then it could be argued that in
the existing organization of universities, these
decisions are being made at school level, so perhaps
this is where ABC should be used. However,
school managers have usually little or no
knowledge of cost behaviour (i.e. cause/effect
relationships) in central services, thus preventing
a full ABC analysis at this level.
The key concern behind the development
and use of ABC, and the focus of most of the
academic literature, is the rational allocation of
central overheads to products, so as to improve
decision-making relative to products and to
sharpen focus on their cost constituents. On the
way to this goal it is often useful to create cost
pools, and to allocate service department costs to
the production departments on the basis of use of
services. However, when a product (a course)
clearly consumes a central resource (library
services), then allocation would usually be directly
to the product.
Our respondents (in general) start from a
different perspective, which is the quest to
determine a rational allocation of central
overheads to schools. If this were the sole or
primary purpose of the exercise, then the objective
would be achieved by any method that charged
the schools approximately what they use in terms
of resources. In this sense it would appear that
Manchester University and others like it have
rightly rejected the complexity of ABC, when
simpler methods achieve the goal, at lower cost,
and with greater transparency.
The responses indicate little interest in
product costing at the centre of the institution.
The focus of the central finance function (and
presumably the financial focus of central
© CIPFA, 1996
55
management) is almost entirely on the school as
a black box, which in financial terms should
receive a fair allocation of overheads and hopefully
make a surplus. In this sense, the university is
operating like an industrial conglomerate, where
central management lets each subsidiary operate
with greatfinancialfreedom, provided the overall
financial performance of the subsidiary is
acceptable.
The usual university model has a highly
devolved academic system in terms of, for example,
the methods of delivery of courses, and the
innovation of new research programmes, so the
central view of a financial black box is reasonably
consistent with the approach to academic issues.
Also, central finance has had no tradition of
concern with product detail (for example cost per
student on a course-by-course basis), so it has
perhaps been a natural development to move to
this 'conglomerate' financial viewpoint. In the
1980s one could perhaps have speculated that
commercial/funding pressures might have pushed
institutions into a centralist Finance approach,
with large management accounting teams looking
at course-level financial detail. In the event, this
has not happened, and institutions have instead
moved this pressure down to school level with
various degrees of devolution, as discussed by
Bourn (1994). Schools, rather than institutions
centrally, may therefore need to be the adopters
of methods like ABC in assessing course-level
profitability. Howson and Mitchell (1995) argued
that in a devolved institution, this focus should
indeed be at school level. This survey would
indicate that even in non-devolved institutions,
central finance functions have little interest in
course-level detail, so the responsibility may need
to be at school level in any case.
If we accept the inevitability of devolution, at
least for the foreseeable future, then it would
appear that we also will have to accept that ABC
in a university will be normally of greater interest
to schools than to central management. This is
very much against the centralist ethos of ABC,
where knowledge of all organizational activities is
investigated and distilled into product cost.
Referring briefly back to the non-ABC set of
respondents, one would assume that they also
work in the same context, and see (1) the primary
goal in allocation to be from central costs to
schools, and (2) the potential role of ABC is
limited to improving such allocations. Those that
see no need for any allocations at all will of course
automatically rule out consideration of ABC.
However, those that do see a need for allocations,
may also (with some justification) rule out ABC
since conventional multiple-base methods seem
adequate for the purpose.
As to whether central finance should or should
not be doing an ABC product-level analysis in the
devolved context, one might ask what sort of
decisions are being taken about products and
who should take these decisions. A typical product
decision is this: 'should we reduce intake to course
PUBLIC MONEY & MANAGEMENT JANUARY-MARCH 1 9 9 6
 56
X by 20 students and increase intake to course Y
by 20 students?'. Whoever makes this decision
(whether the school or the central management)
needs the cost information to support it, some of
which is at school level and some of which is
central. With the ever-increasing move to
devolution, the likelihood is that central finance
will see these decisions as moving to school-level,
so long as resource implications on central services
are passed on as charges to the school. The fact is
also, however, that school administrations rarely
have the expertise required for sophisticated
costing exercises.
In general, allocation methods to schools do
not have the fine detail that schools might desire
for product decisions (for example differentiating
library usage per student, on a course-by-course
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basis), so schools may make decisions suboptimally
in institutional terms. If the scale of this
suboptimization becomes significant, then the
institution may wish to refine the allocation
methods to schools, provided this refinement
does not itself increase costs unduly, or confuse
the decision-making processes.
Returning now to the survey results, and to
the response to~the question about drivers used,
an interesting (and unexpected) aspect was that a
high proportion mentioned some form of income
as a driver (for example research income). Income
is, of course, used commonly as a convenient
acceptable approach to spreading overhead (and
pain) over those who can afford it, rather than
those who actually cause it. However, income
seems to have re-emerged in ABC as an easily
measurable proxy for other drivers, for example
number of financial transactions.
Following the question on drivers,
respondents were asked about 'core' costs, i.e.
whether there were any elements of central cost
for which no suitable driver could be identified.
The majority said that they did have such
difficulties.
Scapens etal. (1994) describe the problem of
core costs at Manchester University very well:
Certain costs, however, are central to the existence of
the university and cannot meaningfully be charged to
resource centres on the basis of any of the three cost
drivers. Examples include the museum and art gallery,
and the core cost of providing services such as the
library and the computer network.
The issue of what is a long-term fixed or core cost
is not simple. On the face of it, the art gallery at
Manchester University is afixedcost, independent
of the number of students or other drivers. Yet it
mightbe argued that if Manchester were to double
in size in terms of students, staff and revenues, it
might well feel disposed to increasing expenditure
on its art gallery. If this is so, then it could be
argued that the art gallery expenditure is not
fixed but has some non-proportional or non-
linear relationship to drivers, so that in effect only
part of the art gallery cost would be viewed as
PUBLIC MONEY & MANAGEMENT JANUARY-MARCH 1 9 9 6
fixed.
A number of benefits were quoted in the
survey, most of which related to the interface
between the centre and the schools, and which
were not particularly linked to the sophistication
of the ABC methods (Manchester, for example,
quoted similar benefits). The most frequently
quoted benefit was that of improved awareness,
knowledge and understanding of costs; in the
comments made, one could often detect a sense of
relief by finance officers that general cost issues
were now being taken more seriously as a
consequence of the allocation exercises. A second
key benefit was that the allocation processes to
schools were accepted as more rational and
equitable; in general, schools seemed to be
supportive of allocation systems because they are
transparent and also because they are perceived
as fairer than top-slicing.
There was less consensus on problems noted.
The most common problem was getting
agreement on drivers. The underlying difficulty
seemed to be establishing a compromise between
the desired accuracy of the process (with more
analysis and more drivers), and the desired
simplicity (so as to limit the time and cost of the
exercise, and so as to produce an easily
understandable result).
Respondents had the opportunity to express
any other views about ABC methods. There was
no real consensus here, and in fact views i:hat we
should avoid over-complexity were balanced by
views that more sophistication was needed.
Conclusion
Perhaps the most important result from the survey
was that the focus on the worth of ABC methods
was largely in terms of its use in allocations from
central services to academic department;;. The
very real cost and effort of an ABC exercise was
being generally judged in comparison with simpler
methods for this allocation, for example in the
sense of bringing more fairness (or perceived
fairness) to the process.
The actual penetration of the ABC methods
might be seen as low, but this is hardly surprising
given they are often being viewed as simply a
more complex alternative to other methods of
allocation to schools. The changes in Higher
Education Funding Council (HEFC) rules in the
early 1990s were a catalyst for some universit ies to
develop costing systems at least for undergraduate
courses. The recent debate about whether
overhead costs are properly covered by external
funding for research projects (rather than in
effect carried by the HEFC), is acting as a similar
trigger for research costs, and the various
published guidance notes (for example Carr,
1994) maintain a continuing presence. So, it is
likely that pressure will continue on institutions
to develop better product costing systems.
The perception of the role of ABC as linr.ited
, 1996

to allocation to schools is not universal, and some
universities have indeed used ABC in the
conventional product-oriented way. However,
the very structure of most universities militates
against this, in that most product decisions are
not taken centrally, and most central finance
functions have no tradition of interest in product-
level detail. The increasing pace of devolution is
likely to reinforce all this, and concentrate interest
in product costs at school level. This raises the
challenge of developing expertise, procedures
and information systems at school level, and
presumably requires the central finance function
to facilitate and co-ordinate this. This will not be
an easy task for a finance function that itself has
no sophistication in product costing.
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Those survey respondents that have carried
out ABC exercises overwhelmingly consider it
was worthwhile. Concerns seem to be outweighed
by the benefits, the most frequently quoted being
the improved awareness and understanding of
cost issues within the university. It is perhaps
therefore plausible to conjecture that these
institutions will one day look back and conclude
that the primary benefit from their initial forays
with ABC was not the cost information at all, but
the initiation of cost-awareness in schools, which
© CIPFA. 1996
57
in the end were destined to become the key users
of such methods as ABC. •
References
Bourn, Michael (1994), A long and winding road: the
evolution of devolution in universities. In Management
Accounting in Universities (CIMA, London).
Carr, J. G. (1994) Effective Financial Management in
Further and Higher Education (Certified Accountants
Educational Trust, London).
Howson, J. and Mitchell, M. (1995), Course costing in
devolved institutions: perspectives from an academic
department. Higher Education Review, 27, 2, pp. 64-
68.
Kaplan, R. S. (1994), Management accounting (1984-
1994): development of new practice and theory.
Management Accounting Research, 5, pp. 247-260
Kaplan, R. S. and Atkinson, A. A. (1989) Advanced
Management Accounting, 2nd edn (Prentice Hall, New
Jersey).
Scapens, R. W., Ormston, A. L. and Arnold, J. (1994),
The development of overhead recovery models at
the University of Manchester. In Management
Accounting in Universities (CIMA, London).
Watts, R. L. and Zimmerman, J. L. (1986), Positive
Accounting Theory (Prentice Hall, New Jersey).
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