Article

The Role of Activity Based Costing (ABC) in Educational Support Services: A White Paper

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Abstract

Many front-line managers who are assuming more financial responsibility for their organizations find traditional cost accounting inadequate for their needs and are turning to Activity Based Costing (ABC). ABC is not a financial reporting system to serve the needs of regulatory agencies, but a tool that tracks costs from the general ledger statement to work activities and then to the actual output of those activities. It mirrors the work of people and equipment; it documents costs as an organization actually consumes financial resources. ABC seeks to answer four very different questions: (1) What activities are being performed by the organization? (2) How much does it cost to perform those activities? (3) Why does the organization need to perform those activities? and (4) How much of an organization's money does each activity consume in the production and delivery of products and services? The paper presents a case study of how ABC was applied to a communications center at a community college in order to reduce costs. Finally, the paper details why such factors as the cost structures of schools, the pace of change, and the cost of processing data have created an interest in ABC. (DFR)

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