The Applicability of the Principles of Activity-Based Costing System in a Higher Education Institution

Abstract

In view of the growing relevance of management accounting in the administration of universities, the recognition of the need for an effective costs assessment system (Jarrar, Smith and Dolley, 2007), and the profound changes that have been occurring in the structure of Portuguese universities, developing and implementing models that may actually be useful for the management of these institutions will be of major importance. The aim of this work is to present a costs assessment model, influenced by the activity-based costing (ABC) and applicable to higher education institutions. Therefore, based on the procedures used by the services of a faculty belonging to a large Portuguese university, we tried to create a model which allows the attribution of each department’s expenditure to the various cost objects – courses, research projects, services. In this way, we tried to present a model which, without being too complex, has a level of detail sufficient enough to enable the production of reliable information and which can be applied in the context of higher education institutions.Activity-based costing, Management accounting