Chapter 6.pdf

ABSTRACT
This research was mainly driven by the markedly void surface in the
management accounting literature in view of the applications of modern cost
management techniques; i.e., activity-based costing (ABC), in a service-
oriented and higher education institutional setting. Using a case study
approach, this study aims at developing a theoretical framework that may help
to compute the education cost of Bachelor in Accountancy (BACC) in one of
the public universities in Malaysia. Based on this, an attempt is made to
formulate an ABC model for the UiTM to determine the cost of the BACC
program, and to compare the cost of the BACC program produced by the ABC
system against the existing (traditional) costing system. This study relies on
a qualitative approach and interviews and observations were made from
secondary data. Under the ABC model, the study finds a lower cost compared
with the traditional method. The findings may be useful in analyzing the
costs, their reasons, the identification of the resources to undertake specific
activities, and deliver management with the pertinent information for several
decision-making processes. Furthermore, the successful implementation of
any sophisticated costing innovation may be contingent upon multiple factors
to deal with the uncertainties.
Keywords: Activity-based Costing (ABC), Higher Education Institution
(HEI), New Public Management, Model Development, Cost Saving.
6.1 INTRODUCTION
New Public Management (NPM) is a global reform movement, which
has been established over the past two decades (Lapuente & van de
The Development of Activity-Based Costing (ABC) in
a Higher Education Institution (HEI): A Lesson
Learned from Malaysia
Jamalludin Helmi, Hashim*
Hazlina Hussein
Haslina Hassan
Accounting Section, UniKL Business School
Kuala Lumpur, Malaysia
*Corresponding author: Email: jamalludin.helmi@unikl.edu.my
6
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114 The Changing Role of Management Accounting and Performance Measurement Systems
Walle, 2020a); Christensen and Laegreid, 2001). The main focus of this
movement is on increasing efficiency (Lapuente & van de Walle, 2020)
and improving accountability (Ingrams et al., 2020). According to
Mahmoud&Othman(2021),thesecanbedonethroughtheenforcement
of key components of NPM, the decentralising management authority
within public agencies. It helps in better management of resources
with strong responsibility and plummeting the management role. In
financial terms, NPM includes the burden of cutting costs and to
enhance the value for money of services being offered. The main
feature of NPM as cited by Hood (1995: 94), is as follows:
“...is lessening or eliminating differences between the public and
the private sector. This also means that the accounting techniques used
in the private sector can be applied in the public sector, especially
when they emphasize on shifting from process accountability towards
a better accountability in terms of outcomes”.
The evolution of management accounting based on the IFAC
framework transformed management accounting to “Strategic
Management Accounting (SMA)”. It also requires the need for “new
tools”, which, among others are the activity-based costing (ABC).
Lapuente and van de Walle (2020) claimed that the merits of NPM
include efficient measurement of costs and revenues, more
concentration on quality outputs, effectual utilization of resources,
enhanced accountability, and better comparability of managerial
performance. Consequently, Van der Kolk et al. (2019) proposed
another paradigm of performance measurement that is pertinent to
the public sector.
Several studies were conducted to investigate ABC implementation
in government agencies, including healthcare sector (Niñerola et al.,
2021); food industry (Osei, 2019); privatization of government entities
(de Souza Amaral et al., 2020) and in the higher education environment
(Pouragha et al., 2020).
The thrust of this study is to advance a theoretical benchmark
which may be applied in computing the cost of education of Bachelor
in Accountancy (BACC) in higher education institutions. An attempt
is made to formulate an ABC model for the UiTM to determine the cost
of the BACC program, and to compare the cost of the BACC program
produced by the ABC system against the existing (traditional) costing
system (Osei, 2019).
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The Development of Activity-Based Costing (ABC)... 115
6.2 CRITICAL EVALUATION OF COSTING MODEL IN HEI
6.2.1 Resource Module
Resources may be explained as the volume to perform work, due to
their “ability to represent all the available means that work activities
candrawon.”(Cokins,2001,p. 48).WithregardtotheHEIenvironment,
Granof et al. (2000) stated that the resources are known as the capacity
that is useful to calculate the cost of underutilized capacity, which is
the cost of assigning fewer students. The “unused capacity” may
indicate a measure of the “opportunity costs” due to under-enrolment
or under-teaching load for lecturers. As such, resources are the
expenditures incurred (or expected to be incurred) by an organization
(Tatikonda & Tatikonda, 2001).
(i) Classification of resources: The classification of resources may
vary depending on the scope and objective of study (DETYA,
2000). Most studies have classified the resource module into
two major cost pools (Rostamzadeh et al., 2021; Alejandero,
2000; Cook, 2003; Evans, 2004; and Newman, 2003). Newman
(2003), for example, termed two resources as direct and indirect.
Meanwhile, salaries had been grouped under direct costs while
indirect costs include non-salary costs such as power, lighting
and insurance.
It can be seen that there was no standard form for reclassifying
the cost centers to the cost pools in the resources module. As a
full costing model, ABC should cover all costs incurred by an
organization, including central administration, student support
operations, development and delivery of courses, as well as
direct, indirect, operational and instructional costs (Hoang et
al., 2020).
(ii) Sources of resource data: The primary source might be from
the salary or pay slip, general ledger, vouchers and other related
documents. In the HEI environment, if a lecturer serves for
several different courses (or programs), the payroll system
needs to identify unique labor classifications for a given cost
centre.
6.2.2 Activity Module
An activity is the work done in converting inputs into outputs (Brimson
& Antos, 1999). Therefore, according to Brimson, 1991: 203) an activity
is:
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“a combination of people, technology, raw materials, methods, and
environment that produces a given product or service. Activities
describe what an enterprise does: the way time is spent and the outputs
of the process”.
Thus, it will comprise the activities across the university and the
costs related to them (DETYA, 2000).
(i) Classification of activities: Activities can be classified into
several categories (Mccafferty, 2019; Drury, 2000; Tatikonda &
Tatikonda, 2001). As for HEI, the activities can be classified into
four levels: unit, batch, product, and facility (Hoang et al., 2020;
Cooper, 1988a). The unit-level activity involves the activities
that are performed each time a unit is produced, for example,
assembling a widget or grading papers. The batch-level
activities are performed each time a batch of units is produced,
for example, the lecturing activities and the orientation program
for a group of students. The product-level activities are needed
to support the production of each type of product, for example,
preparing for a course, or designing a course. The facility-level
activities are activities that are needed to endure the facility’s
overall functioning. For examples, the corporate headquarters’
costs and salaries of campus directors at the branch campuses.
The available ABC models are recommended for at least three
major focuses to succeed in identifying activities, namely, the (i)
individual (Rostamzadeh et al., 2021; Heaney, 2004; Newman,
2003), (ii) faculty (Pouragha et al., 2020; Alejandro, 2000; Cook,
2003, and (iii) department ( Hoang et al., 2020; Evans, 2004;) .
(ii) Methods used to define activities: While retaining individual
activities as the central focus, Kissa et al. (2019) and Hoang et al.
(2020) conducted interviews to define such activities. However,
Goddard and Ooi (1998) combined the interview with direct
observation of library and finance department staff. They
(Goddard & Ooi, 1998) identified the key activities and
flowcharted the steps.
The present study will adopt a combination of several steps. In
the first step, the identification of key activities will be done by
flowcharting the flows of activities (lecturers) who performed
their tasks and matching them with the university’s
organizational chart. In the second step, a mini workshop will
be arranged with the respective personnel (or subordinates) to
refine the list of activities. The final step is to conduct interviews
with HOS or HOD.
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Table
6.1:
Summary
of
ABC
model-based
activity
analysis
Activity
level
Activity
Heaney
(2004)
Cox
et
al.,
(1999)
Cook
(2003)
Granof
et
al.
(2000)
Alejandro
(2000)
Evans
(2004)
Kober
et
al.
(1996)
DETYA
(2000)
Unit
level
Grading
papers
√
1
Batch
level
Orientation
to
group
of
students
√
1
Lecturing
to
class
√
√
√
√
√
5
Selection
√
√
2
Billing
(ordering/receiving)
√
√
√
3
Advertising
√
1
Shelving/conservation
√
1
Research
√
√
√
3
Public
services
√
√
√
3
Administration
services
√
√
√
3
Finances
√
√
√
3
ITC
√
√
2
Plant
√
1
Human
resources
√
√
2
Professional
development
√
1
Product
level
Course
design
√
1
Selecting
course
materials
0
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6.2.3 Cost Object Module
According to Drury (2000, p. 21), a cost object is defined as: “any
activity for which a separate measurement of costs is desired”. For
instance,ifonewantstoknowthecostof“something”,that“something”
is known as a cost object. As the cost objects are outputs and services
where costs accumulate (Cokins, 1996). Other examples of cost objects
include products, service lines, distribution channels, customers, and
outputs of internal process. In the higher education institution’s
context, cost object is BACC program. The following section describes
the rationale of choosing this program as a cost object.
• Cost drivers module: Resource driver and Activity driver
A cost driver is a quantifiable unit for which a cost is assigned
(e.g., Jaafar et al., 2017). Identification of appropriate cost drivers
is an important exercise in ABC. The two types of cost drivers
identified are: (i) resources driver, and (ii) activities driver
(Cokins, 2010)
Under resource driver approach, resources are assigned to
activities, while the activity driver is used to assign the costed
activities to cost objects. The graphical illustration (Figure 6.1)
shows the link between the resources and costed activities.
Resource drivers are noted as “RD” while activity drivers are
noted as “AD”.
Figure 6.1: Graphical illustration of ABC model
Source: Adapted from Tatikonda and Tatikonda (2001, p. 22).
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6.3 METHODOLOGY
A few researchers (e.g., Birnberg et al., 1990; Bhimani, 2020) posited
that some limitations of management accounting research are related
to the usage of a single data source. This research uses the mixed
methods approach research design. A case study approach is used to
formulate the ABC model for the Bachelor of Accountancy (BACC)
program at the UoABC based on the actual cost data for 201X.
In the first phase, a case study approach is utilized to develop the
ABC model for the Bachelor of Accountancy (BACC) programme at
the UoABC based on the actual cost data for 2004. The costing
information produced by the ABC model is then compared with the
costing information using the existing system.
6.4
THE ACTIVITY BASED COSTING (ABC) MODEL FOR THE UNIVERSITY
OF ABC (UOABC)
6.4.1 Overview of Accounting System at UoABC
University of ABC (UoABC) separates their academic administration
into three clusters: Science and Technology (ST), Social Sciences and
Humanities (SSH), and Business Management (BM). There are three
streams under the ST cluster (Pure Science, Medical Science and
Engineering); two streams under the SSH cluster (Social Sciences and
Humanities); and one stream under the BM cluster. The total number
of faculties in each cluster are twelve under ST, seven under SSH and
five under BM.
6.4.2 Cost Calculation using Traditional Costing Method
There are four steps involved to calculate the cost per program for
UoABC, as listed and briefly explained below.
Step 1: Calculate the overall cost per student: To compute the overall cost
per program, the total expenses of the specific period or year (in this
case 202X) were alienated with the number of students (overall) which
was estimated to be 7044 in 2004. Thus, the average cost per student is
amounts to RM 2,556.96.
Step 2: Calculate the overall cost per Bachelor student: This amount
indicates the cost per student, some weighted needs to be considered.
As UiTM Shah Alam segregated the cost based on the level of academic,
they put the different weights for different levels of education, as listed
in Table 6.2. The overall cost per Bachelor’s student is amounts to RM
3,835.44.
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Step 3: Calculate the overall cost per student for Bachelor’s of Accountancy:
As this amount indicates the cost per student for BACC and the rules
stated that different faculty required different portions of overhead,
the weighted of stated needs to be added to this amount. As such, the
weighted listed in Table 6.2 is calculated to arrive at the total amount
of cost per student for BACC, which amounts to RM 5,254.55.
Step 4: Calculate the overall cost per student for Bachelor’s of Accountancy
student for UoABC: This amount shows the cost per student for BACC.
It is standard practice for UoABC HQ to differentiate the overhead
allocated from HQ-based on-campus location. Table 6.3 lists the
different weighted charges to the different locations. After the
calculation, the cost per student for BACC in UoABC amounts to RM
10,509.10.
Table 6.2: Weighted for equivalent full time students (EFTS)
Equivalent full time student Weighted Weighted
Full time students Certificate – Off
Campus
0.75
Pre 0.5 Diploma- Distance
Learning
0.5
Matriculation, Diploma 1 Diploma- Off Campus 0.75
Certificate 0.75 Bachelor Degree- Off
Campus
1
Bachelor Degree 1.5 PhD 3
Master Degree, PhD
Professional
2
Table 6.3: Weighted for faculty
Weighted – cost average Weighted Weighted cost average Weighted
Faculties Campuses
Accountancy, law and
administration
0.37 A, B, C 1.5
Applied science, health
technology
0.63 D, E 1
Language centers 0.37 F, G, H, I 2
Source: Interviewed with En Sanip Wahid, Bursary UoABC: 5 – 6 September 2020.
As can be seen from Tables 6.2 and 6.3, the use of weights for three
categories (namely, EFTS, faculty and location) is a must and endorsed
by the Ministry of Higher Education Malaysia (MOHE).
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6.4.3 Problems and Limitations of the Existing System
UoABC uses software that integrates all accounting functions of the
system, known as Financial Accounting Information System (FAIS).
With regard to cost information, the existing budgeting system in
UoABC provides very limited information.
(i) Chart of accounts (COA): The charts of accounts (COA) are not
founded on cost centers. The COA is founded on faculty and
not on the level of courses offered. It is advocated that the COA
is to be used as a cost center at the program level and the unit
level is to be used a service cost centers.
(ii) The information on emolument: The emolument expenses are
computed on the basis of lecturers in their respective faculties
and not on FTE (full-time equivalent) where they serve. For
example, the emolument for a lecturer who taught Diploma in
Accountancy with 12 credit hours (or 0.75 FTE), and also taught
a student Diploma in Business Studies with another 4 credit
hours (or 0.25 FTE) will be alienated into two parts - 75 percent
for Diploma in Accountancy and another 25 percent for Diploma
in Business Studies.
(iii) Expenses for part-time lecturers: The expenses related to part-
time lecturers are charged on the basis of their locations and not
on the basis of cost centers. For example, the expenses for staff
at the bursary office who teaches Masters in Accountancy
(MAcc) will be charged as a cost of the bursary office, and not
under the MAcc program.
(iv) Direct and indirect cost: A lack of appropriate method was
observed to allocate the portion of the direct and indirect costs
in the UiTM system as a whole. For example, electricity expenses
in the main campus should be allocated based on a sound
method such as floor area, time allocation, etc. Similarly, for
research development (RD), the total cost at branch
campuses should be allocated on the basis of student ratio using
weightage (EFTS) and weightage course category (based on the
average costs at the main campus). The estimation is based on
EFTS to the total expenses at either Shah Alam or branch
campuses to segregate between direct and indirect costs.
(v) Depreciation: The details about depreciation expenses are not
properly accounted for. The current practice is to charge
depreciation to the bursary office. One of the limitations of the
existing system is that it fails to provide an accurate distinction
Book 1.indb 121 13-Jul-22 2:12:06 PM

between direct and indirect costs. As such, the ABC system
offers an alternative as it is more comprehensive and is able to
calculate more accurate costs per student or program.
6.4.4 The ABC Model for UoABC
The model was developed in two phases. Phase I focused on identifying
the resources consumed, reclassifying the cost centers to the cost pools
and defining the activities performed within the university. Phase II
includes three steps: (1) identifying cost objects, (2) recognising an
activity driver for each cost activity, and (3) linking the “cost activity”
to cost objects based on activity drivers. It will include seven major
steps to develop the ABC model for UiTM Terengganu, as listed below:
Step 1:
Identify the resources
Step 2:
Reclassifying cost centers to cost pools
Step 3:
Identify the cost object
Step 4:
Identify resources drivers
Step 5:
Identify activity drivers
Step 6: Assigning cost from resource module to the activity Module
Step 7:
Assigning cost from activity module to the cost object
Module.
6.4.5 General Overview of ABC Model for UoABC
Figure 6.2 shows the general overview of ABC model for UoABC.
Figure 6.2: The general overview of ABC model for UoABC
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Figure 6.3: Comparison of cost centers and cost pools: UioABC
6.4.6 Resource Module
Table 6.4 provides an overview of the resource module. Five
sub-modules are included in it, namely, faculty, school, infrastructure,
student support, administration support, and other / general purposes.
The next section will discuss in greater detail the components and
items included in every sub-module.
Table 6.4: Resource module: Sub-modules and description of accounts
No. Sub-modules Description of accounts Item/s Code
account
no.
1 Faculty/school Faculty/school Salary/wages
claims
10000
20000
2 Infrastructure Depreciation, utilities,
repairs/maintenance
Salary/wages
claims
depreciation
10000
20000
30000
3 Student support Student counselling,
library services
Salary/wages
claims
10000
20000
4 Administration
support
Finance, purchasing,
human resources IT
Salary/wages
claims
10000
20000
5 Others/general
purposes
Vehicle road tax,
insurance
Other expenses 50000
6.4.6.1 Faculty/School
The sub-module for faculty/school will consist of all expenses that are
incurred directly or indirectly by the faculty/school. These are the
costs related to academic matters, such as wages and salaries for
respective lecturers; their claims, including mileage for academic
enhancement activities. Therefore, the major component of expenses
under this sub-module consists of all related expenses under code
10000 (Emoluments: including wages and salaries, allowances,
employee’s contribution) and code 20000 (claims and mileage) for
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respective lecturers. Below is the explanation of account code number
10000, lecturers and staff at academic department:
1. Lecturers: There are two categories of lecturers in the present
study, i.e., the accounting lecturers and the servicing lecturers.
In the case of accounting lecturers, some of them teach various
subjects for Diploma in Accountancy, Bachelor of Accounting
and other accounting subjects in different programs. In some
cases, the accounting lecturers can also be categorised as
servicing lecturer, a lecturer who is from the English language
center or Center of Islamic Thought and Understanding (CITU),
but teaches students in BACC.
2. Non-Academic staff: Even though academic staff were based
on the traditional cost center, the present study is “reclassified”
on the basis of “cost pools” basis. Therefore, academic staff
include various positions that are considered to serve directly
to the academic office. The complete list of staff that is classified
under academic was given by the administration office and
validated by the Office of Academic Affairs, UoABC. In total
there are 38 personnel in the academic department.
It is to be noted that the resource module has two main
componemts: (i) the salary of the staff, and (ii) the claims made
by all academic staff either for their part-time lectures (for
lecturers) or their overtime (for other academic staff). Both the
academic and non-academic staff may claim for mileage,
accommodation, and other related claims. Therefore, the total
cost for the resource module is the sum of salary (code number
of 10000) and allowances (code number of 20000). Figure 6.4
shows the graphical illustration of the cost extraction process.
Figure 6.4: The cost extraction process
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6.4.6.2 Infrastructure
Thissub-moduleinvolvesexpensesincurredbytheFacilityDepartment
at the respective campus. The list of staff at the Facility Department for
202X was provided by the Administration Department.
The first category of costs captured for staff at the Facility
Department covers Account Code 10000 (Emoluments: including
wages and salaries, allowances, contributions). The second category
refers to the claims made by staff under the division (BPF). As for the
various claims paid to them, the expenses from the Account Code
20000 (supplies and charges), claim and mileage, etc. (21000 – 29xxxx),
were captured and summarised. Other than that, the sub-module
included depreciation figures that were extracted directly from the
codeinthefinancialstatementasat31December202X.Thedepreciation
policy for UiTM is to charge 20 percent of total asset (account Code
30000) using the straight line method (SLM).
6.4.6.3 Student Support
The Department of Student Affairs (DSA) gave the list of staff at the
Student Support Department (SSD. It consists of 55 staff, including 42
staff from the DSA and 13 staff from the library. The cost for staff at
DSA included the emoluments (including wages and salaries,
allowances, contribution) to the supplies and charges, claim and
mileage. Other costs, like supplies and charges; claim and mileage
were also considered.
6.4.6.4 Administration Support
Staff, classified under Administration Support (AS), represent the
biggest number of personnel in the UoABC. This staff group consists
of 131 personnel representing two major sub-divisions, namely:
(i) Administration and Security, and (ii) Bursary Office. There are 118
personnel in the Administration and Security division and 13 staff
under the Bursary office.
The processes involved to calculate the cost in the previous
sub-modules were repeated in this sub-module. The same cost items
which were covered under emoluments (including wages and salaries,
allowances, contribution) supplies and charges, and claim and mileage
were listed and tabulated. Refer to Table 6-., row four.
6.4.6.5 Other/General Purposes
The last sub-module in the resource module is Other/General
Purposes. This sub-module is created to compile several cost items
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which either are not frequently in use or that the cost items are
extensively serving across many areas in the administration. Examples
of the cost items under this sub-module include road tax and insurance
for motor vehicles.
Table 6.5: Total cost of resource module
Cost pools RM No.
of
staff
Cost centres
RM
Emoluments Claims/
mileage
Assets Gifted
and fixed
charges
Other/
general
expenses
Total cost
centres
Faculty school 4,354,392.37 218 2,925,803.15 1,031,967.11 16,980.00 379,391.26 250.85 8,388,880.47
Infrastructure 4,255,343.85 18 498,456.12 3,465,222.51 208,447.77 496.00 82,721.45 8,871,388.73
Student
support
4,842,670.89 55 1,453,627.48 3,378,937.31 9,859.25 246.85 225,427.77
Administration
support
4,447,106.20 131 3,482,275.51 912,540.38 23,822.95 28,467.36 413,816.31
Other 111,686.48 - 28,718.21 82,721.42 246.85 111,686.51
Total cost 18,011,199.79 18,011,199.79
6.4.7 Activity Module
The activities related to each module were identified and defined after
conducting interviews with the Head of Programs (and coordinators)
and the Head of Department (Deputy Directors and Assistant Register).
Table 6.6 summarises the activity module of the sub-modules and list
of activities.
• Teaching: DETYA (2000) listed 17 activities related to teaching.
Out of the 17 activities, the present study reclassified it into four
subcategories. The first subcategory is preparation, which may
include preparing notes for lectures, assignments, tutorials, and
seminars. The second subcategory is delivering, which may
include delivering lectures and tutorials. The third category is
student consultancy, which refers to the session conducted to
help and guide students in answering selected questions in the
textbook. The fourth category is marking, which may include
marking assignments, tests, quizzes, examinations, etc. Table 6.7
summarises the above discussion.
Table 6.6: Summary for activity module: sub-module and list of activities
Sub-module Activity/ies
Teaching •
Preparation – preparing notes for lectures, assignments,
tutorials and seminars
• Delivering – to deliver lectures and tutorials
• Student consultancy
• Marking – marking assignment, examinations
Book 1.indb 126 13-Jul-22 2:12:06 PM

Research and
publication
• Writing publication articles, books, manuals
• Conducting research with grant
• Conducting research without grant
• Presentation at conferences
Professional
development
• Undertaking postgraduate qualifications
• Attending conference
• Taking study leave
• Professional consultancy
Administration
and support
• Handling assessment administration
• Chairing and serving on committees
• Coordinating subjects and courses
• Organising fieldwork placement
• Liaising with staff
• Advertising the university
• Promoting courses;
• Providing clerical support;
• Establishing and monitoring office systems
• Providing clerical support
• Establishing and monitoring office systems
• Managing front office operations
Table 6.7: Activity 1: Teaching and list of activities
No. ABC – DETYA (2000) ABC UiTM Terengganu
Category List of proposed activities
1 Preparing assignments Preparation Preparing lectures (11)
2 Marking assignments Preparing assignments (1)
3 Developing DE subjects Preparing examinations (4)
4 Preparing examinations Preparing tutorials seminars (15)
5 Developing internal
subjects
Delivery Delivering lectures (6)
6 Delivering lectures Delivering tutorials seminars (7)
7 Delivering tutorials
seminars
Consultancy Consulting students (9, 10)
8 Marking examinations Marking Marking assignments
examination (2, 8)
9 Consulting external
students
Evaluating subjects (14)
10 Consulting internal
students
Deleted Liaising with industry (16)
11 Preparing lectures Amortise subject development (17)
Contd…
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12 Supervising postgrad
research
Supervising postgrad research (12)
13 Revising subjects Developing internal subjects (5)
14 Evaluating subjects Developing DE subjects (3)
15 Preparing tutorials
seminars
16 Liaising with industry
17 Amortise subject
development
• Research and publication: The present study used the term
“Research and Publication (RP)” instead of “Research and
Consultancy” (RC) because UioABC’s culture is closely related
to RP. Furthermore, the activities listed in the DETYA (2000),
were more closely interrelated to research and publication as
compared to research and consultancy. Table 6.8 lists the
sub-module of Research and Publication (first column).
• Professional development: The third sub-module in the Activity
Module is Professional Development. DETYA (2000) listed four
activities that contributed to this sub-module. The four activities
are: (i) developing staff, (ii) undertaking postgraduate
qualifications, (iii) attending conferences and, (iv) taking study
leave. Refer to Table 8.0 (second column).
• Administration and support: For the administration support, the
present study listed only twelve major activities. Examples of
activities: establishing and monitoring office systems. recruiting
staff, handling assessment administration, and providing clerical
support. Refer to Table 8.0 (third column).
Table 6.8: Activities 2,3 and 4: Research and Publication (RP), Professional
Development and Administration Support
No. Research and publications
(RP)
Professional
development
Administration support
1 Conducting research (with
and without grant)
•
Developing research
proposals
• Data collection
• Analysis data
• Report writing
Developing staff
(internal courses,
seminar, training)
Establishing and
monitoring office systems
2 Taking study leave. Recruiting staff
3 Managing assessment
administration
4 Rendering clerical support
5 Chairing and serving on
committees
6 Organising fieldwork
placement
Book 1.indb 128 13-Jul-22 2:12:07 PM

7 Writing publication articles,
books, manuals
Administrating front office
operations
8 Presenting at conferences Handling overseas travel
9 Managing consultancy
project
Arranging secretarial
services
Acquiring services
rendered
Conducting travel
conferences
Liaising with staff
• Community activities: As for the present study, the community
activities may include lecturers who are involved with non-profit
organizations (NGO) like the Parent and Teachers Association at
school, Youth Association’s activities, sports for their
communities, advisor for associations, and other communities
services. Other than that, the community activities may also
include involvement in motivational talks for the students and
the community.
(i) Methods used to define activities: The prior discussion obviously
showed that a number of activities may be applicable on the
basis of many focus areas, e.g., the community services,
involvement in any non-government organization, etc. This
leads to the different approaches for the data collection
processes. A few researchers (e.g., Heaney, 2004) adopted the
same approach, i.e., an interview to define activity. Evans (2004)
began with an examination of the university’s organizational
chart and conducted a random moment study. DETYA (2000)
provided two methods to define an activity, firstly to collect
opinions about the basic activities that should be part of
activities module, and secondly, shortlisted the activities
performed by the lecturers in the workshop conducted. The
present study will utilize both methods used by Evans (2004),
Kober et al. (1996), and DETYA (2000). The university’s
organizational chart was reviewed to determine the contact
person for interviews. Then, the review of lecturers’ timetable
records was made to gather the common activities of the
lecturers. Thereafter the activities were shortlisted before the
list was validated by HOS or HOD during the informal
interviews and discussions.
Book 1.indb 129 13-Jul-22 2:12:07 PM

6.4.8 Cost Object Module
The cost object for the present study is the BACC program. This
program is divided into eight semesters with emphasis on the inter-
disciplinary approach to accounting.
6.4.9 Cost Drivers
6.4.9.1 Resrouce Drivers
Resource drivers show a logical and quantifiable relationship between
the resource and the activity. The quantities are used to assign resources
to activities. The major consideration in selecting the resource drivers
is similar to the consideration highlighted by previous researchers (for
example, Cokins, 2010; Mccafferty, 2019; Zaman, 2006; Evans, 2004;
Newman, 2003) on the availability of information. Time allocated
(percent) is used to assign the following resources to activities:
1. Academic salaries and on costs
2. General salaries and on costs
3. Casual academic salaries
4. Temporary assistance
• Time allocated (percent): The time allocated (percent) resource cost
driver is the time allocated to the respective activities, in terms of
percentage. Surveys of HOS and Faculty Management was used
to collect the information. However, this method can only
provide accurate data when it is gathered on a regular basis,
from a wide range of participants. The present study used the
time allocated (percent) as the resource driver to allocate cost
from Faculty/School to the Activity Module. Table 6.9
summarises the above discussion.
Table 6.9: Resource driver quantity (RDQ) for “time allocated”
Resources
module
Activities Time allocated
(percent)
Faculty/school Teaching (including preparation and
standard contact hours)
60
Research consultancy 12
Professional development 10
Administration support 16
Community services 2
Floor area (square meter)
The “floor area” is used as a resource driver to assign two sub-modules
to the Activity Module, namely: (i) “infrastructure” and (ii) others.
Book 1.indb 130 13-Jul-22 2:12:07 PM

Generally, this is due to the nature of expenses that served all students
from various courses. The data from Facility Management Department
is analysed. Table 6.10 shows the quantity of resource drivers.
Table 6.10: Resource driver quantity (RDQ) for “floor area”
Code Category Total
(m2
)
%
A Academic Block – Lecture Theatre and
Tutorial Rooms
28,194.92 12.00
B Academic Centre 20,309.34 9.00
C Professional Development ILQAM
Library
5,526.39 2.00
D Office Space 101,546.35 45.00
E Community (Mosque, Sports Complex,
Shooting Range)
72,029.89 32.00
Total 227,606.89 100.00
• Direct allocation: Direct allocation is used to assign resources to
activities. Where the resource cost driver is employed, the
resource should have direct relationship with the activity to
which it is assigned. In this model, the direct allocation is used to
assign administration support to “Administration and Support”
in the activity sub-module. The above discussions is summarised
in Table 6.11 which displays the name of resource drivers and
the quantity of resource driver (RDQ) used in developing the
ABC model for UoABC.
Table 6.11: Summary of resource drivers and quantity
Resource
module
Assigned to (activity
sub-module)
Resource driver
quantity (RDQ)
Resource
drivers
Faculty/school
Teaching
Research and publication
Professional development
Community activities
60
12
10
16
2
Time
allocated
Infrastructure Teaching
28,194.92
20,309.34
5,526.39
101,546.35
72,029.89
Square
meter
Contd…
Book 1.indb 131 13-Jul-22 2:12:07 PM

Student
support
Teaching
28,194.92
20,309.34
5,526.39
101,546.35
72,029.89
Square
meter
Administration
support
Administration support 100 Direct
allocation
Teaching 60
Research and publication 12
Others Professional development
10
16
2
Time
allocated
6.4.9.2 Activity Drivers
Like resource cost drivers, activity cost drivers represent a logical and
quantifiable relationship between the activities and cost objects (in this
case, the BACC program). As the model developed in the present
study was based on DETYA (2000) model, only candidates suggested
by the DETYA (2000) model will be considered the best candidates for
activity drivers. Table 6.12 lists the detailed candidates of drivers in
the Activity Module.
Table 6.12: Activity module and candidates of activity drivers
Activity
module
Assigned to
(Cost object)
Candidates of activity drivers
Teaching BACC 1. Number of students
2. Number of assignments
3. Number of examinations
4. Number of examination hours
5. Number of students’ consultation hours
6. Number of lecture hours
7. Number of tutorial hours
8. Number of contact hours
9. Number of teaching hours
Research and
publication
BACC 1. Number of research project hours
2. Number of innovations
Professional
development
BACC 1. Number of conferences attended
2. Number of trainings
Book 1.indb 132 13-Jul-22 2:12:07 PM

Administration
support
BACC 1. Number of hours (administration)
2. Number of meetings attended
3. Number of committees involved
(administration)
4. Number of students
Community
services
BACC 1. Number of community projects
The confirmation of choosing them was based on the interviews
conducted with selected personnel including HOD and coordinators
of programmes, i.e., the faculty administration. The first source, i.e.,
HOD, provided the list of activity drivers as follows:
1. Number of internal student consultation hours
2. Number of external student consultation hours
3. Number of subject revision hours
4. Number of participating cultural events
Another source, i.e., the faculty administration, provided another
list of driver quantities which was based on the historical data. These
included:
1. Number of lecture hours
2. Number of tutorial seminar hours
3. Number of student enrolments
4. Number of contact hours
• Number of teaching hours: The number of teaching hours is the
activity driver that assigns teaching activity to the cost object.
Out of nine candidates suggested by DETYA (2000), the present
study used a number of hours taught as the activity driver. Data
on the teaching hours were gathered from the class timetable at
the department. As normal practice and policy for UoABC, the
maximum workload per week is 18 hours. For the accounting
lecturers, teach the BACC programs for an average of 11.1 hours
per week (62 percent) and teach other programs (including
Diploma and Bachelor’s level) for an average of 6.86 hours per
week (38 percent). Table 6.13 shows the average teaching hours
and their percentage as discussed above.
Book 1.indb 133 13-Jul-22 2:12:07 PM

Table 6.13: Teaching hours, average and percentage (%)
No. Name Designation BACC Others Maximum
workload
1 A bin B Lecturer 16 2 18
20 B Lecturer 4 14 18
21 C Lecturer 18 0 18
Total 234 144 378
Average 11.1 6.857 18
Percent 62.00 38.00 100.00
• Number of research project hours: Based on the UiTM Terengganu
Annual Report (202X), out of 60 types of researches done in 202X,
only nine which is equivalent to 15 percent were done by the
accounting lecturers.
• Number of training: The 202X Annual Report combined the
trainings or courses and seminars under one category. For the
year 202X alone, UoABC managed to have 209 types of trainings
attended. This includes 42 internal pieces of trainings and 167
external pieces of trainings. Table 6.14 shows the workout on the
percentage to quantify the activity driver to assign the cost
activity to the cost object, i.e., the BACC program in this study.
As can be seen, the number of activity drivers to the cost object
will be 8.36.
Table 6.14: Activity driver quantity (ADQ) for number of trainings (category and
percentage)
Resource driver Number of
trainings
Assign to cost
activity (%)
Activity driver
quantity
Internal Training 42 4.00 1.68
External Training 167 6.68
209 8.36
• Number of students: For the administration support, the number
of students will be used to assign the cost under this category to
the cost object. This is due to the unavailability of data on the
number of hours administered, the number of meetings attended,
and the number of committees involved. As such, the same data
shown in Table 6.15 is used for this purpose, i.e., 5 percent of the
total cost is assigned to the BACC program while the balance (95
percent) is assigned to “other programmes”.
Book 1.indb 134 13-Jul-22 2:12:07 PM

Table 6.15: Activity drivers quantity (ADQ) for number of students
Intake 202X Total students
202X
Jan June Jan Jun Av %
Diploma AC110
AM110
BM111
BM112
BM114
CS110
EE111
HM110
HM112
HM115
OMT114
815
200
450
270
136
641
171
348
217
206
552
720
268
387
244
163
515
193
318
234
210
539
811
198
449
270
135
635
170
343
213
205
542
708
265
384
238
160
509
192
314
232
204
532
1114
364
609
373
228
827
277
486
339
307
803
16.00
5.00
9.00
5.00
3.00
12.00
4.00
7.00
5.00
4.00
11.00
4,006 3,791 3,971 3,738 5,724 81.00
Bachelor AC220
BM220
BM222
BM224
BM229
CS224
236
129
134
181
134
0
268
149
147
197
142
25
234
125
133
179
133
0
265
149
144
196
140
24
382
212
211
286
207
24
5.00
3.00
3.00
4.00
3.00
0.00
814 928 804 918 1,320 19.00
Grand Total 4,820 4,719 4,775 4656 7,044 100.00
• Number of community projects: The 202X UofABC Annual Report
recorded that there were 25 community projects initiated and
participated by various parties. For example, participation in the
Educare Exhibition at ABC (18 – 22 February 202X), Education
Fair (24–26 June 202X), and others. As no information was
available to measure and quantify the involvement of the faculty
members, the percentage of BACC staff from Table 6.16 will be
taken. This means that 8.75 percent of the total cost of
Administration Support will be assigned to BACC program. The
balance goes to the item “other programs”.
Table 6.16: Percentage of BACC as compared to the lecturer’s population
Department/admin Category Number of staff %
Academic Non-accounting lecturers
DIA
BACC
203
16
21
84.58
6.67
8.75
Total 240 100.00
Book 1.indb 135 13-Jul-22 2:12:07 PM

Even though, the acceptable level of capacity can be made by
estimating the practical capacity of the resources supplied as a
percentage of the theoretical capacity (Kaplan and Anderson, 2004).
This can be done by simply estimating that practical full capacity as a
certain percentage (for example, 75% to 85%) of full capacity. with
regard to the present study, if one lecturer’s maximum teaching load is
18 hours per week (with 40 hours of working), its practical full capacity
is 32 to 35 hours per week. As a summary, Table 6.17 presents the
respective activity driver and its quantity based on the above
discussion.
Table 6.17: Summary of activity drivers quantity for accounting module
Activity
module
Assigned to (cost object)
(%)
Candidates of resource
drivers
BACC Others
Teaching 62.00 38.00 •
Number of teaching hours
Research and
publications
15.00 85.00 •
Number of researches
project hours
Professional
development
4.00 96.00 • Number of trainings
Administration
support
5.00 95.00 • Number of students
Community
services
8.75 91.25 •
Number of community
projects
6.5 COST CALCULATION OF BACC PROGRAM
The ABC model developed in the present study will be based on taking
into consideration every major aspect of the university’s management
such as teaching, research, and community services. Figure 6.5 shows
the graphical illustration of the ABC model for UioABC. As can be
seen, the cost per student for UoABC amounts to RM 8,678.54. Table
6.18 shows the process of allocating the cost from cost pools in the
Resource Module to the Activity Module. Table 6.19 displays the
amount for every sub-module in the Activity Module, after the
assignment process took place.
Then, all the cost from the Activity Module was transferred to the
cost object, using the Activity Drivers as listed in Table 6.15, while
Table 6.16 presents the output of the process. As can be seen, the cost
per student produced by the ABC system amounted to RM 8,678.54.
Book 1.indb 136 13-Jul-22 2:12:07 PM

Figure
6.5:
Graphical
illustration
of
ABC
model
for
UiTM
Terengganu
Book 1.indb 137 13-Jul-22 2:12:07 PM

Table 6.18: Assignment from resource module to the activity module (divers and
quantity)
Resource
module
Assigned to (activity
sub-module)
Resource
driver
Quantity
(percentage/
number)
Total
activity
modules
Faculty school Teaching
Research publication
Percentage
of effort
60%
12%
10%
16%
2%
2,612,635.42
522,527.08
435,439.24
696,702.78
87,087.85
Infrastructure Teaching
(Floor area)
Number of
spaces
28,194.92
20,309.34
5,526.39
101,546.35
72,029.89
527,132.90
379,703.91
103,321.52
1,898,512.98
1,346,672.54
Student support Teaching
(Floor area)
Number of
spaces
28,194.92
20,309.34
5,526.39
101,546.35
72,029.89
599,888.34
432,111.04
117,582.06
2,160,547.75
1,532,541.71
Administration
support
Teaching
Direct
allocation
0.00%
0.00%
0.00%
100.00%
0.00%
4,447,106.20
Others Teaching
Percentage
of effort
60.00%
12.00%
10.00%
16.00%
2.00%
67,011.89
13,402.38
11,168.65
17,869.84
2,233.73
18,011,199.79
Table 6.19: Cost allocated from resource module to activity module
Total assigned
to activity
resource
module
Faculty
school
Infrastructure Student
support
Administration
support
Others Total activity
modules
Teaching 2,612,635.42 527,132.90 599,888.34 67,011.89 3,806,668.54
Research
publication
522,527.08 379,703.91 432,111.04 13,402.38 1,347,744.41
Professional
development
435,439.24 103,321.52 117,582.06 4,447,106.20 11,168.65 667,511.47
Administration
support
696,702.78 1,898,512.98 2,160,547.75 17,869.84 9,220,739.55
Community
Services
87,087.85 1,346,672.54 1,532,541.71 2,233.73 2,968,535.83
Total 18,011,199.79
Book 1.indb 138 13-Jul-22 2:12:07 PM

The last part of the model development process is to assign cost
from every sub-module in the Activity Module to the Cost Object
Module, using the activity drivers listed in Table 6.19. The output from
this process is summarised in Table 6.20
Table 6.20: Activity Module
Total assigned
to cost object
module
Total activity
modules
Activity driver BACC Others
Teaching 3,806,668.54 No of teaching hours 2,347,445.60 1,459,222.94
Research
publication
1,347,744.41 No of research project
hours
202,161.66 1,145,582.75
Professional
development
667,511.47 No. of trainings 26,700.46 640,811.01
Administration
support
9,220,739.55 No. of students 500,045.78 8,720,693.77
Community
activities
2,968,535.83 No. of community
projects
238,847.71 2,729,688.12
Total 18,011,199.79 3,315,211.22 14,695,998.58
6.6
COST COMPARISONS BETWEEN TRADITIONAL COSTING SYSTEM
AND ACTIVITY-BASED COSTING (ABC) SYSTEM FOR UOABC
Table 6.21 shows the cost comparison computed for each BACC
student using the traditional costing system against the ABC system.
As can be seen, the computed cost per program appeared to be different
using different methods of costing system. The cost per program using
traditional costing showed a higher cost amounting to RM 4,014,472.38
as compared to the ABC system amounting to RM 3,315,202.28.
Table 6.21: Cost comparison: traditional and ABC
Traditional costing Activity-based Costing (ABC) System
Cost centres RM Cost pools RM
Emoluments
(Salaries and Benefit)
8,388,880.47 Faculty School 4,354,392.37
Claims and Mileage 8,871,388.73 Infrastructure 4,255,343.85
Assets 225,427.77 Student Support 4,842,670.89
Gifted and Fixed Charges 413,816.31 Admin 4,447,106.20
Other/General Expenses 111,686.51 Other 111,686.48
Total Cost 18,011,199.79 Total Cost 18,011,199.79
Cost per student (BACC) 10,509.09 Cost per student (BACC) 8,678.54
Cost per programme
(382 students)
4,014,472.38 Cost per programme (382
students)
3,315,202.28
Book 1.indb 139 13-Jul-22 2:12:07 PM

6.7 CONCLUSION
This chapter described the methods and procedures used to develop
the ABC model for UoABC, which aim was to calculate the cost of
education for the BACC program using two systems, the traditional
costing system, and the ABC system. The results showed that the cost
calculated using the ABC system recorded a lower cost per student
(RM 8,678.54) as compared to the traditional system (RM 10,509.09)
per student.
In the era of COVID-19, its impact, in the long run, is unpredictable.
Therefore, higher education institutions will have to contain the cost of
their operations. In this regard, Cokins (2021) argues that as ABC
provides a piece of accurate cost information , decision makers may
appreciate where they generate or lose money as well as how much?
They may gain more confidence in what they want to transform in the
institutions, which are likely to affect that what they anticipate and
desire.
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