Activity-Based Costing Proves Worthwhile

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A new study reveals how activity-based costing (ABC) can be applied to a single department of a major institution of higher education to manage systems more effectively.

The study was funded by The PricewaterhouseCoopers Endowment for The Business of Government, and is called 'Using Activity-Based Costing to Manage More Effectively.' Authors are Professor Michael H. Granof, Assistant Professor David E. Platt and Assistant Professor Igor Vaysman, all from The University of Texas at Austin.

The report shows how using ABC over traditional accounting systems allocates "overhead" costs to programs and activities in a more reflective way of the factors that influence them.

The case study presents several lessons that are applicable to both governmental and not-for-profit organizations, especially executives in government who quantify performance and financial costs.

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