Activity based costing in universities ‐ An inappropriate technique?

The technique of ABC has been widely adopted by universities in the UK, with the assumption that the more accurate identification of costs makes them more manageable. It is the purpose of this paper to consider this question of manageability through identification and allocation in the university sector and to question this as a basis for decision making and resource allocation. The type of costing systems in place in an organisation must meet the needs of the organisation as a whole and there are a number of factors that will affect the type of costing system that is required and there are a number of costing systems that can be used. This paper considers the use of ABC within a university and whether school costing and course costing can meet the requirements of a university facing a challenging business environment where a significant amount of pressure is being exerted on the financial stability of some universities. In doing so the ability of ABC to satisfy the informational requirements of a university is called into question.