Activity-Based Costing Proves Worthwhile

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 [1] 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 [2].

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.