University Cost Management by Integrating Activity Based Costing and System Dynamics Approach

Document Type : Research Paper

Authors

1 Ph.D Candidate in Accounting, University of Alzahra, Tehran, Iran.

2 Associate Professor of Accounting, Alzahra University, Tehran, Iran.

10.22103/jak.2021.18063.3550

Abstract

Objective: In order to fulfill their mission in lack of resources and increasing needs, university management should improve their decisions not only by considering optimization of performance indicators, but also by considering the effect of their decisions on cost of services. This requires using tools such as activity-based costing to provide accurate information about the cost of services. However, in this approach, the dynamic relationships and the variability of cost and activities over time are not considered. Dynamic modeling provide an efficient tool for studying and testing the impact of possible changes on real systems in a virtual environment. Therefore, the aim of this study is to gain a better understanding of dynamic behavior of cost over time and under different conditions using dynamic modeling.
Method: Due to the multiplicity of activities, cost and cost drivers in universities, and due to the dynamics of cost drivers over time and the complexity of depicting the relationships between multiple costs and activities in  university as a dynamic system, in this research, the system dynamics approach has been used for modeling activity based costing. This research is a case study based on financial and operational data of Al-Zahra University. The main services and activities of the university are determined based on the classification of the university's programs and activities in Table (1) of Appendix (4) of the annual budget rules. Observing, interviewing, and reviewing the structure of the university's activities were used to identify activity drivers, cost drivers, support activities, and relationships between costs and activities.
Results: One of the initial findings is the cost of the main services, which the validation results show the high accuracy of the model (mean difference of 0/03 percent). Then, the cost of the main services was examined under the two scenarios of reducing the number of undergraduate students and increasing the number of professors, in order to achieve the desired ratio of students to professors and strengthen the population of Master and PhD students. Comparing the results enable management make better decisions based on available resources. Findings also show that this model also eliminates the complexity and cost of updating activity-based costing system and also provide the possibility of timely cost analysis by modeling the causal relationships between all variables and taking into account the dynamic nature of the variables. Applying this approach also makes it possible to predict the cost of services for several future periods.
Conclusion: Dynamic modeling of the university cost management system allows managers to examine the cost of services in a virtual environment, under different policies regarding faculty recruitment, student admission, and etc., which may have a positive effect on receiving desired goals and make decisions based on forecast of the cost of services and activities and available resources.

Keywords

References

جلیلی، آرزو؛ اشرفی، جواد (1394). تعیین هزینه سرانه دانشجو با استفاده از روش هزینه‌یابی بر مبنای فعالیت-بررسی موردی واحد علوم و تحقیقات تهران، فصلنامه حسابداری مدیریت، 8(25)، 99-83.
خدیور، آمنه؛ امینی، الهام (1398). پیش‌بینی بهای تمام شده خدمات بانکی با استفاده از پویایی‌شناسی سیستم، دومین کنفرانس ملی انجمن ایرانی پویایی‌شناسی سیستم‌ها، تهران.
رهنمای رودپشتی، فریدون؛ قرشی،‌ داود؛ فارسی، عباس؛ نوروزی، محمد (1397). هزینه‌یابی بر مبنای فعالیت زمان‌گرا در صنعت بانکداری (مطالعه موردی با کشاورزی). فصلنامه دانش حسابداری و حسابرسی مدیریت، 7(27)، 37-29.
مشایخی، بیتا؛  عبدزاده کنفی، محمد؛ فرجی، امید (1393). بررسی امکان سنجی طراحی و استقرار بودجه ریزی عملیاتی در دانشگاه‌های دولتی ایران: (مطالعه موردی دانشگاه تهران). دانش حسابداری و حسابرسی مدیریت، 3(9)، 32-13.
References
Anguiano, M. (2013). Cost structure of postsecondary education. Guide to making activity-based costing meaningful and practical. Retrieved from https://maximizingresources.org/files/Cost-Structure-of-Post-Secondary-Education.pdf.
Blocher, E.J., Stout, D.E., Cokins, G. (2010). Cost Management: A Strategic Emphasis. Fifth Edition, Published by McGraw-Hill Education.
Chu, E. (2003). A review of simulation studies on supply chain management. Journal ofAcademy of Business and Economics, 2(1), 22-27.
Cox, S.K., Downey, G.P., Smith, G.L. ( 2002). Activity-based costing and higher education– can it work? Kansas State University Office of Planning and Analysis, Manhattan, Kansas, June, 1-9.
Cropper, P., Cook, R. (2000). Developments: Activity-based costing in universities – Five years on. Public Money and Management, 20(2), 61–68.
Desrochers, D.M.,Soldner, M., Weko, T. (2016). What do postsecondary leaders need to know about institutional finance? And what can available data tell them? Background papers, convening on financial data in postsecondary. Washington, DC: American Council on Education.
Elkelety, I. (2006). Towards a conceptual framework for strategic cost management- the concept, objectives, and instruments.Working Papers, Chemnitz University of Technology.
Horngren, C.T., Foster, G., Datar, S.M., Rajan, M., Ittner, C., Baldwin, A.A. (2010). Cost accounting: A managerial emphasis. Issues in Accounting Education, 25(4), 789-790.
Hurlburt, S., Kirshstein, R., Rossol-Allison, P. (2014). The ABCs of activity-based costing in community colleges. Retrieved from https://maximizingresources.org/files/The-ABCs-of-Activity-Based-Costing-in-Community Colleges.pdf.
Jaafar, H., Jizat, J.E.M., Ismail, R., Yusof, R. (2017). The Internationalization of Higher Education: An Estimation of Cost Using Activity Based Costing Method. International Journal of Academic Research in Business and Social Sciences, 7(7), 763-780.
Jalili, A., Ashrafi, J. (2015). Determining per capita of students with activity-based costing method (Case study: Tehran Sciences and Research Branch). Management Accounting, 8(25), 83-99 [In Persian].
Jones, T.C., Dugdale, D. (2002). The ABC bandwagon and the juggernaut of modernity. Accounting, organizations and society, 27(1-2), 121-163.
Kaplan, R.S., Cooper, R. (1998). Cost and effect: Using integrated cost systems to drive profitability and performance. Boston, MA: Harvard Business School Press.
Kelton, W.D. (2010). Simulation with Arena (5th ed.). Mcgraw-Hill Co.
Khadivar, A., Amini, E. (2019). Cost estimation of banking services using system dynamics. Second National Conference of the Iranian Association of Systems Dynamics, Tehran [In Persian].
Khataie, A.H., Bulgak, A.A., Segovia, J.J. (2010a). Advanced decision support tool by integrating activity-based costing and management to system dynamics. Technology Management for Global Economic Growth, 1-4.
Khataie, A.H., Bulgak, A.A., Segovia, J.J. (2010b). Activity-based costing and management applied in a hybrid decision support system for order management. Decision Support Systems, 52(1), 142-156.
Kim, J. (2014). Activity-based cost modeling and dynamic simulation study of an international reusable packaging systems. Ph.d Dissertation, Michigan State University.
Lima, C.M.F. (2011). The applicability of the principles of activity-based costing system in a higher education
institution. Economics and Management Research Projects: An International Journal, 1(1), 57–65.
Mashaykhi, B., Abdzadeh kanafi, M., Faraji, O. (2014). The investigation of planning and implementing feasibility of performance budgeting in the Iranian universities (Case study: The University of Tehran). Journal of Management Accounting and Auditing Knowledge, 9(3), 13-32 [In Persian].
Massy, W.F. (2016). Course-level activity-based costing as an academic and financial tool. Retrieved from https://www.tiaainstitute.org/publication/course-level-activity-based- costing.
Nørreklit, H. (2000). The balance on the balanced scorecard: A critical analysis of some of its assumptions. Management Accounting Research, 11(1), 65-88.
Rahnamay Roodposhty, F., Ghoreishi, D., Farsi, A., Norozi, M. (2018). Time-driven activity-based costing in banking industry (A case sudy in bank Keshavarzi). Journal of Management Accounting and Auditing Knowledge, 7(27), 29-38 [In Persian].
Ramadan, S.Z., Barghash, M.A. (2015). Calculating the departmental credit-hour cost for higher learning institutions using joint costing and activity-based costing systems simultaneously. International Business Research, 8(5), 195.
Romano, R.M., Palmer, J.C. (2016). Financing community colleges: Where we are, where we’re going. Lanham, Maryland: Rowman & Littlefield Publishers.
Sterman, J.D. (2000). Business dynamics: Systems thinking and modeling for a complex world. Boston, MA: IrwinMcGraw-Hill.
Tirol-Carmody, K., Kardash, N., Chang, K., Ecker-Lyster, M. (2019). Adopting an activitybased cost management model at a community college: A case study. Community College Journal of Research and Practice, 44(7), 482-491.

Files

History

  • Receive Date: 30 August 2021
  • Revise Date: 11 December 2021
  • Accept Date: 21 December 2021

Share

How to cite

Statistics