Implementing Activity-based Costing and its Implications for a Service Firm in the Tme Share Exchange Industry

This study reports on how an activity-based cost accounting (ABC) system was implemented in a service firm in the timeshare exchange industry. In addition, the study highlights the similarities of implementing ABC in a service firm and a manufacturing firm. An important contribution of this field study is to illustrate the separation of labor activities into those that are productive versus those that are not. Further, the study shows the importance of separately allocating the non-productive activities, which are traceable to the primary service lines from those that are not traceable to them. This is analogous to separating the product sustaining activities from the facility sustaining activities when implementing ABC in a manufacturing firm. The Results and Discussion section illustrates the implications of using the ABC information for making decisions about service mix in operating departments, for assessing the implication of employee productivity on service cost, and for service pricing.