The title is: Activity-based Costing versus Time driven Activity based costing – case stud
– DOctor comments and what his expectation:
The objective of the research is to propose a framework for applying a cost accounting system to distribute overhead costs (Time driven ABC) on products or services provided by a company located in Saudi Arabia.
1- A literature view on the costs system and its three types (the traditional system, the ABC system, and the time-driven ABC system) and mentioning its details, disadvantages, and advantages
2- Detailed distribution of direct and indirect Overhead
3- Mention how the Time driven ABC costing system will help in addressing the distribution of costs in profit centers and commissioning centers
4- Establishing the foundations for time allocation and transfer of costs through Time driven ABC
5- After mentioning the literature view, the case study begins to apply the Time driven ABC system to a company located in Saudi Arabia (total cost over the number of hours)
International Journal of Business and Management; Vol. 16, No. 1; 2021
ISSN 1833-3850 E-ISSN 1833-8119
Published by Canadian Center of Science and Education
A Guide to Implementation of Time- Driven Activity -Based Costing
in Saudi Electronic University
Salah Oraby1
1
Assistant Professor, Accounting Department, College of Administration and Finance, Saudi Electronic
University, Saudi Arabia
Correspondence: Salah Oraby, Assistant Professor, Accounting Department, College of Administration and
Finance, Saudi Electronic University, Saudi Arabia. E-mail: s.oraby@seu.edu.sa
Received: October 3, 2020
Accepted: November 10, 2020
Online Published: December 24, 2020
doi:10.5539/ijbm.v16n1p68
URL: https://doi.org/10.5539/ijbm.v16n1p68
Abstract
This research proposes a guide to implementation of time- driven activity -based costing (TDABC) in Saudi
Electronic University (SEU) as an alternative to the traditional costing systems. It is worth mentioning that the
cost accounting system should support mission and vision of the university by detecting any idle capacity and
providing relevant information for rational decision-making as well as improving the quality of services
provided to students and finally managing SEU’s resources efficiently and effectively. According to Saudi’s
vision 2030, public universities in Saudi Arabia should act on both of revenue side and cost side.
In the current costing system of SEU, there are no cost pools at colleges’ level, at academic departments’ level, at
courses’ level, as well as at students’ level. Rather cost pools found at university’ level only. Therefore, the
current costing system provides neither information on unit cost per student at any academic program nor
information on the unused capacity at any resource centers.
Despite the fact that TDABC theoretically overcomes the criticism to both traditional costing system that uses
direct labor or machine hours as a cost driver and the traditional activity- based costing (ABC that uses many
transactions cost drivers to allocate overhead costs to cost objects. The implementation of TDABC is still
challenging particularly in universities by using the time as the primary cost driver for allocating resource costs
to final cost objects in academic programs especially the human labor is considered the main resource in
universities.
The proposed guide to implementation TDABC provided SEU’s management information, including but not
limited to, the average actual unit cost per student in each academic program either per semester, or per year,
comparing actual fees students paid in each academic program to the actual average unit cost in each academic
program to determine whether SEU covers all costs. In addition, comparing the average unit cost per student
among all academic programs and investigating reasons of variations. The guide helps management determine
the unused capacity in each resource center as well as preparing budgets of all resource centers accurately based
on the actual used capacity.
Keywords: activity based costing, time-driven activity -based costing- traditional costing system- resource
center, Saudi electronic university
1. Research Problem
Today the accounting information system becomes an integral part of the management information system.
Whereas, cost information generated by the accounting information system is being used by managers for
planning, controlling and evaluating the operations. However, Under the SEU’s current accounting system, past
expenditures are allocated to common cost pools in general ledgers according to expenditure type such as
salaries, maintenance, travel, etc. There is no accumulation of expenses by campus, division, section, academic
programs, or activities to determine what is driving the cots.
(Lesetedi & Mohee, 2019) pointed out that in public universities, budget is funded by government appropriations
that historically estimated based on incremental models in absence of calculation of actual overhead costs for
resource centers. Hence, deficit or excess funds may exist and students’ tuition fees as sub source of the budget is
estimated without taking into consideration the actual costs of programs. As a result, imbalance exists between
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sides of the demand and supply.
On the other hand, most of universities’ costs are overhead costs (indirect costs) need to be allocated to both
operating and supporting departments. Under traditional costing system, volume- based cost drivers are used to
allocated indirect costs to cost object (students in each academic programs), but direct costs are traced directly to
cost object without any problem under any costing system (Pierce & Brown, 2006); Ismail, 2010).
Due to the dramatic changes in business environments, traditional costing system was replaced by the activitybased costing system to remove the existing shortcomings in the traditional costing system. ABC was developed
in late 1980s to avoid cross subsidization between cost objects by using multiple transaction -based cost drivers
(Cooper, 1987) (Cooper & Kaplan, 1988).
In universities costs vary significantly due to the diversity of cost objects and using the traditional costing system
in measuring cost objects generates imperfect information that will not be reliable for either strategic or
operational decisions
(Paulo and Alex 2016). Currently cost management has been shifted dramatically from the traditional costing
system that is mainly focuses on allocating overheads to cost objects to ABC system and to TDABC system.
However, academics and practitioners criticized ABC model as expensive and time consuming as well as
arbitrary model. Whereas a vast majority of studies including Kaplan himself documented that ABC should be
given up in the long term (Kaplan & Anderson, 2004) (Byrne, et al., 2009). Therefore, TDABC has been found
as an alternative to ABC to improve the allocation of overhead costs using time-based drivers. Under TDABC,
cost pools in general ledger are assigned to resource centers and main activities are identified within each
resource center that might be department, unit, sector, section within the organization that consumes human and
non-human resources.
(Ratnatunga, et al., 2012) indicated that TDAB does not completely differentiate from ABC because the two
models share the same cost pools for resource centers, and activities and cost objects. But the difference is fewer
resource centers exist under TDABC and activity cost pools are found in the resource centers as well as cost
drivers are time- based not transactions –based; as a result, the reduction of measurement errors.
Implementation of TDABC has been done since it was developed by (Kaplan & Anderson, 2007) who indicated
that TDABC was applied in more than 200 companies. However, the researcher found fewer case studies in the
education industry for example (Yalianteta, et.al, 2018) (Pernot et.al, 2007) (Ratantingatal, et.al.2012)
(Lesetedi& Mahee, 2019) (Ringelstein, 2018). However, neither of them provided a comprehensive guide to
implementation of TDABC at the university level, college level and academic programs level.
It has been proved that designing costing system in services industries is a hard process in general and in
universities in particular because of the unique nature of services provided. Whereas services in universities are
intangible and heterogonous as well as consumed just they produced (Lang field et al., 2009). Therefore, this
study tries to fill in this gap in the literature.in addition, as far as the researcher knows, this study is the first in its
kind in the kingdom.
2. Research Objectives
The purpose of this case study research is to propose a guide to help implement TDABC in SEU to manage its
costs efficiently and effectively to achieve its mission and vision.
3. Research Limitation
Saudi Electronic University has 18 academic programs provided by four colleges in addition to the common first
year. The proposed guide helps management implement TDABC at the university level in general and at the
accounting program level at college of administration and finance. The guide shows the way and steps to
calculate the unit cost per student in one academic program namely; accounting program that can be used for any
academic program at any college in the university.
4. Research Methodology
The researcher uses the inductive approach in which the researcher starts with the related previous researches to
develop the theory of the research topic and uses the deductive approach to explaining how to apply the theory to
design SEU’s updated costing system. The guide does not use inputs values either actual or estimated to
calculate unit cost per student in each academic program to maintain SEU’s data security. In addition, the focus
of this research is to explain the way and steps of calculating rather than the results of calculations.
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5. Literature Review and Theoretical Analysis
Assigning direct costs to products, services and customers is an easy process in cost accounting but the opposite
is correct regarding overhead costs whereas the researches have been continuing since decades ago to resolve the
dilemma. In the literature review section, approaches to allocation overhead costs to cost objects are in-depth
discussed and analyzed.
5.1 Traditional Costing System
Under traditional costing system, costs of both direct material and direct labor are traced economically and
directly to final cost objects. However, manufacturing and non-manufacturing overheads have been allocated to
the production by using the pre-determined overhead rate based on direct labor hours or volume of products as
well as machine hours (Shabahan, 2012) (Gahramani, 2008) (Kowsari, 2013).
Traditional costing system gave inaccurate information about the product and services costs, which in turn
misleading decision makers because it is direct costs- oriented by focusing on product costs such as direct labor,
direct material, manufacturing overhead, while costs such as marketing, sale and administrative costs are
allocated to income statement as period costs to comply with GAAP or IFRS.
5.2 Activity Based Costing (ABC)
Because of the shortcomings of traditional costing system, a new system called ABC came to existence and
considered as one of the management accounting system innovation. It was developed in order to overcome the
weaknesses of traditional costing systems by focusing on overhead costs to properly allocate them to cost
objects.
ABC has been adopted widely in all industries including universities. However, (Broad & Crowther, 2001)
conducted a study on the appropriateness of ABC system in universities especially it has been adopted by
universities in the United Kingdom claiming that the accurate determination of costs bring costs manageable.
However, the study explained that the problem with ABC system in the university environment make the system
inappropriate and the alternative to ABC is the throughput accounting.
On the other hand, (Hashmi, 2013) conducted a study to examine the differences in perceptions about the
usefulness of costing information provided by ABC and the traditional costing system and between users and
preparers. The results found that the information provided by ABC system is more useful than information
provided by the traditional costing system. The results also founded no material difference between users and
prepares regarding the quality of ABC system.
ABC is a new management accounting techniques developed by (Cooper & Kaplan,1988) and used in both
manufacturing and services sectors in response to dissatisfaction with traditional management accounting
techniques that rely on volume-based methods for allocating overheads to cost objects (Ellis-Newman,2003)
The application of ABC system goes through two main phases. In the first phase, overhead costs are allocated to
activities’ cost pools using resource drivers. in the second phase, overhead costs are allocated from activities’
cost pools to final cost objects using multiple transaction -based activity cost drivers, such as, number of
machinery set up; customer orders; number of production times; number of purchasing orders, as well as and
number of delivering products to customers (Weygandt et al., 2005).
(Berry, 1994) introduced a new method for overhead allocation in universities but he did not propose a
methodology for ABC implementation. While (Goddard & Ooi, 1998) explained that using ABC methodology in
library services at the University of Southampton showed huge differences in the allocation of overheads costs in
higher education institutions between both ABC method and the existing system. Authors argue that despite the
ABC method might overcome some of the problems of overhead allocation. However, in practice, the ABC
approach is still less efficient than in theory. In addition, it is very expensive to develop and maintain such a
system.
(Cropper & Cook, 2000) surveyed the current costing systems in the higher education sector, scanning recent
published literature and analyzing the progress made by the academic institutions on the implementation of ABC
system. The authors concluded that ABC is regarded as the most significant costing innovation in higher
education, but findings suggest that the academic institutions have made a little bit progress so far towards
implementing ABC.
(Tatikonda & Tatikonda, 2001) have studied the implementation of ABC in universities. They showed that
simplifying the implementation resulted in several challenges. for examples; using single volume basis, summing
fixed and variable costs in one cost pool, assuming all courses consume the same activities in the same ratios,
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when, in fact, some programs may subsidize others. However, the authors concluded that the ABC system might
provide some advantages to academic institutions in the area of cost information, identification of resource needs,
and distribution of scarce resources, course and program mix, cost control.
(Nidoo, 2011) Conducted a study to implement ABC in private universities in South Africa as a solution of the
dissatisfaction of traditional costing system but he did not submit a comprehensive conceptual approach in this
regard.
(Lutilsky & Dragija, 2012) conducted a study on possibilities and challenges for implementation of ABC model
as a complete costing method, at European universities. The study analyzed the major challenges in
implementing. The study proposed guidelines for the development of a full costing system at the University of
Zagreb using the pillars of ABC namely; classification of costs, activity centers, cost objects and activity cost
drivers. Results indicates fewer universities implemented full costing systems because of many reasons, for
example, resistance to change; inaccurate data provided by accounting systems; and universities are still income
-oriented rather than cost- oriented.
(Charafa & Rahmounib, 2014) examined the satisfaction of the adaptors of ABC for Moroccan companies using
the Importance Performance Analysis (IPA) to identify strengths and weaknesses. Based on survey method, two
samples of companies have been examined namely: ABC adaptors and non-ABC adaptors. The results pointed
out that the ABC adopters were more efficient and satisfied with their costing system compared to non -ABC
adaptors. However, they have not yet fully benefit from the advantages of the ABC system.
5.3 Time -Driven Activity -Based Costing (TDABC)
TDABC dates back to late 1990s by Steven Anderson and his Acron Company. He introduced this model under
the name of Activity Based costing on Transactions. In 2001, Kaplan, the member of directors of Acron
Company, contributed to developing this model and presented the theory of Time Driven Activity Based Costing.
(Cooper & Kaplan, 1988) supported the use of direct labor hours in service organizations as a cost driver.
(Soltani & Kalani, 2010) simplified the model by omitting both staff interview process and allocation resource
costs to activities. The TDABC focus is on processes rather than activities and this makes the system more
controllable. (Jurek & Bars, 2012) pointed out TDABC model is simpler and less expensive; Implementation is
quicker, easier, its operational is faster and less expensive than ABC.
TDABC provides solutions to the shortcoming of both traditional costing and ABC systems. However, it has
some inherent limitations. (Gervais et. al.2010) reported that there might be a confusion on whether to use
standard costs or actual costs to set the unit cost per resource groups. in addition, the difficulties in measuring the
required time to perform activities. TDABC explains any differences between the time needed by activities and
the potential time departments’ employees have and hence better capacity management (Barrett, 2005).
The implementation of TDABC revealed some advantages, such as; it is a system of easy design (Pernot et al.,
2007). It allowed the study of efficacy and effectives of the operations from the available capacity and used
capacity perspective (Barrett, 2005). It applies in industries and companies with complex cost objects (Kaplan &
Anderson 2004).On the other hand, some limitations have been observed, for examples, it requires much time
and data to forecast time equations (Varila, Seppänen & Suomala, 2007).
(Hooze & Hansen, 2018) compared ABC and TDABC in terms of how to allocate resources to activities and
finally to cost objects. The study showed that TDABC provides information that is more accurate than ABC
when traceability of resources to activities is good even if activities’ costs traceability to cost object is bad, while
ABC provides information that is more accurate when activities’ costs are traceable to products regards of the
level of resource traceability to activities. The study examined the impact of mixing the two systems together.
The study found that integration one ABC element with TDABC system improves accuracy, while integrating
one TDABC element with ABC undermine accuracy.
(Rodriguez & Nasiri, 2012) Explained that TDABC can estimate the quantity of idle resources and determine the
different characteristics of the activities in the resource centers by estimating time equations in which the time
consumed by an activity is a function of its different characteristics. Equations assign the time and the cost of the
activity to the cost object based on characteristics of each cost object. (Kaplan & Anderson, 2007) suggested
estimating the time needed in minutes or hours to perform activities by direct observation, interviews and
information by cost modelers.
Kowsari, (2013) pointed out some disadvantages of TDABC such as correct and reliable drivers are not available
causing more problems rather than solving problems, such as, differences in time drivers, collecting and
updating data.
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(Santans & Afonso, 2014) investigated the applicability of TDABC by confining 20 studies published by
different authors in ISI database covering different countries and different industries as well as different
methodologies but unfortunately, none of those studies covered implementation in universities. (Ringelstein,
2018) conducted a study to investigate the claims whether TDABC is an alternative method to traditional ABC
for accounting for overhead costs. The results pointed out that the differences between the two methods are
minimal and problems of implementation remain unsolved.
(Lesetedi, & Mohee, 2019) conducted a study to implement TDABC at BOU University. They developed a
general and broad framework to apply the TDABC at the university level rather than college level.
Finally, the researcher can say that not all previous studies have developed a comprehensive and practical
framework to implement TDABC in universities. Whereas no answers are given on many questions, for example,
how are cost pools in general ledgers allocated to resource centers? What are resource centers at the university
level? What are the main activities within resource centers? What are resource drivers? How is the practical
capacity calculated in each resource center? What are the academic program in the university? What are the main
activities within each academic program? How is the time required to perform the main activities calculated?
How is cost per student in each academic program calculated? The researcher is trying to answer the questions in
the case study.
6. The Proposed Guide to Implementation of DTABC in SEU
This section explains how to translate the pillars and the theory of TDABC into action in SEU’s is costing
system as it is the case study of this research.
6.1 Saudi Electronic University Profile
SEU is a government and educational institution established on 10/8/2011 by a royal decree issued by king
Abdullah bin Abdul-Aziz. SEU is the only specialized university in blended learning model offering graduate
and undergraduate degree programs in the Kingdom of Saudi Arabia. SEU has now four colleges namely;
college of administrative and financial sciences, College of Computer and Informatics, College of Health
Sciences, College of Science and Theoretical Sciences.
6.2 Assigning Cost Pools from SEU’s Ledger Accounts to Recourse Centers’ Cost Pools
SEU’s costing system does not accumulate costs by resource centers. Therefore, the first step is to assign cost
data in general ledger to resource centers in separate cost pools that next allocated to the academic programs and
finally allocated to the main activities of each academic program to calculate unit cost per student in each
academic program based on the activities consumed by students. The research used traditional allocation bases to
assign costs from general ledger accounts to cost centers whereas traceability is used for costs that can be traced
to specific resource centers and allocation is used for common costs. (Table 1)
Table 1. Assigning cost pools from Seu’ ledger accounts to recourse centers’ cost pools
Cost Pools
Allocation Bases
Salaries And Wages
Tracing
Rents
Square Meters
Insurance
Insures Assets Values
Depreciation Expense
Tracing / Assets Values
Supplies
Tracing/ No. Of Staff
Travel
Tracing
Graduation Expenses
Traced
Housing Allowances
Non Saudi Faculty Members
Freight & Carrier
Allocated By Estimation
Printing & Stationary
Allocated By Estimation
Telephone Expenses
Number Of Calls
Utility Expenses
Floor Space
Source: Prepared By the Researcher.
6.3 Resource Centers
In SEU there are two main types of resource centers the first is operating resource centers in which SEU’s
services are provided or processed to students and contribute directly to the profit; the second is supporting
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centers that consume resources and indirectly contribute to profitability. To determine resource centers in SEU,
the organizational chart should be the starting points. Based on the organizational chart the following two
supporting resource centers are proposed, the first is teaching- related resource centers the second is nonteaching- related resource centers. (Table 2). On the other hand, Operating resource centers are the Academic
programs in all colleges of SEU plus common first year in which students consume different teaching activities
and services. (Table 3)
Table 2. Supporting resource centers in Saudi electronic university and their cost drivers
Resource Center
University Rector.
Vice Rector of Academic Affairs.
Vice Rector of Branches.
Vice Rector of Planning, Development And Quality.
Vice Rector For Graduate Studies And Research
Vice Rector of Female Student Affairs.
Deanship of Admission And Student Affairs
Deanship of Graduate Studies
Deanship of Scientific Research.
Deanship of Information Technology
Institute For Research And Study
Resource Cost Driver
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of CRN in Each Academic Program
No .Of Students In Each Graduate Program
No .Of Students In Each Female Academic Program
No .Of Students In Each Academic Program
No .Of Students In Each Graduate Program
No .Of Students In Each Graduate Program
No. of CRN in Each Academic Program
No .Of Students In Each Graduate Program
No. of Faculty Members and Staff In Each Academic
Program.
No. of Students In Each Academic Program.
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Students In Each Academic Program
No. of Academic Programs
No. of Students In Each Academic Program
No. of Academic Programs
No. of Academic Programs
No. of Academic Programs
No. of Academic Programs
No. of Academic Programs
Deanship of Human Resources.
Department of Knowledge Resources.
Department of Public Relation and Media.
Department 0f Legal Affairs.
Department of Scholarship And Recruitment.
Department of Planning And Budget.
Department of Internal Audit.
Department of Administrative Affairs.
Department of Finance.
Department of Contracts And Purchase.
Department of Safety And Security.
Department of Student Support.
Department of Storage And Warehouses.
Department of Projects And Maintenance.
Department of Correspondence.
Department of Media Services.
Department of Partnerships and Cooperation.
Source: Prepared by the Researcher.
Table 3. Operating resource centers in Saudi electronic university and their cost drivers
College
College of Administration and
Finance
College of
Informatics
Computing
And
College of Health Sciences
College
of
Science
Theoretical Studies
And
First common year
Source: Prepared By the Researcher.
Resource Centers(Academic Programs)
Accounting
Management
E Commerce
Finance
MBA
Information Technology
Computer Science
Data Science
Master Of Science In Information Security
Master In Cyber Security
Health Informatics
Public Health
Master Of Healthcare Administration
Arabic For Non-Speakers
Humanities
Basic Studies
English And Translation
Law
First common year
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6.4 Calculating Unit Cost per Student in Academic Programs Offered by the College of Administration and
Finance
In this section, the study explains steps to calculate the cost per student in academic programs offered by the
College of Administration and Finance in general and in accounting program in particular as an example as
follows:
6.4.1 Calculating Total Costs of Operating Resource Centers
As mentioned earlier that operating resource centers or profit centers are the academic programs in College of
Administration and Finance. Namely, four scientific bachelor degree program and one MBA business program.
(Table 4).
As explained in (Table 4) the cost of each study program has both direct costs and overhead costs. While direct
costs incurred within study programs, overhead costs are incurred within support departments either at the
college level or at the university level. Under TDABC, overhead costs are assigned from support departments to
study programs using resources drivers that causes the study program to consume costs from support
departments as explained in (Table 2)
Table 4. Total cost of academic programs at the college of administration and finance
Study program
Direct cost
Overhead costs
Total costs
Accounting
✓
✓
✓
Management
✓
✓
✓
E commerce
✓
✓
✓
Finance
✓
✓
✓
MBA
✓
✓
✓
Total
✓
✓
✓
Source: Prepared by the Researcher.
6.4.2 Calculating the Practical Capacity
As suggested by (Kaplan & Anderson, 2004) the practical capacity could be estimated as a percentage of the
theoretical capacity allowing deducting 20% of the theoretical capacity for having tea, breaks, pray, lunch,
departure and arrival. Another alternative suggested by (Kaplan & Anderson, 2004) to estimate the practical
capacity by conducting reviews of past events and activities levels.
(Table 5) indicates that the Practical capacity is measured using a unit time and is expressed as percentages of the
theoretical capacity after excluding the annual leave and the public holidays and the weekends, meeting, as well
as training hours. Therefore, it is supposed that the total practical capacity of each study program is 80% of the
total normal capacity of the faculty members’ workload in each study program as explained by the following
equation:
Pc= (w – (a+ h. + e) where: pc stands for the practical capacity for one faculty member, w, stands for calendar
weeks per years, a, stands for annual leave, h, stands for public holidays, e, stands for weekends. Hence, the
normal capacity of working hours is 40 hours per week; the practical capacity of each faculty member will be 32
hours per week (80% x 40 hours).
Using the equation, the total practical capacity for each faculty member equals 32 hours*4 weeks *10 months (a
two month annual vacation has been excluded) * 60 minutes = 76,800 minutes per year, or 38,400 per semester.
The practical capacity per study program per year is calculated using the following equation:
P=pc*n where, p, stands for the practical capacity per program, pc, stands for the practical capacity per faculty, n,
stands for number of faculty members.
p= 76,800* No. of faculty members in study program.
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Table 5. The practical capacity of academic programs at the college of administration and finance
Study program
Practical Capacity In Minutes
Accounting
✓
Management
✓
E commerce
✓
Finance
✓
MBA
✓
Total
✓
Source: Prepared By the Researcher.
6.4.3 Calculating the Practical Capacity Rate of Academic Programs in College of Administration and Finance
Now both of total cost and the practical capacity of each academic program are available (in Table 4 and 5).
Therefore, the practical capacity rate of each Academic Programs is calculated by the following equation:
Unit cost capacity rate= total costs of capacity supplied/ estimated practical capacity supplied.
Cr = t c / p c where, c r, stands for capacity cost rate, t c, total cost of the study program, p c, stands for the total
practical capacity of the study program. (Table 6)
Table 6. The practical capacity rate of Academic Programs on College of Administration and Finance
Study program
Total Costs (1)
Practical Capacity In Minutes(2)
Practical Capacity Rate per Minute(3)= (1/2)
✓
✓
✓
Management
✓
✓
✓
E commerce
✓
✓
✓
Finance
✓
✓
✓
MBA
✓
✓
✓
Total
✓
✓
✓
Accounting
Source: Prepared By the Researcher.
6.4.4 Allocating Program Costs to Its Main Activities
To determine the time needed to perform a single main activity (Kaplan & Anderson, 2004) suggested using
either direct observations or interviews. However, the researcher will use time equations. The nominator, the
average time taken to perform a single main activity is estimated by using time equations and characteristics of
each main activity. The denominator, Practical Capacity Rate per Minute is available in (Table 6)
Faculty member work is not limited to teaching activities in classes either face to face classes or virtual classes,
but also includes other activities such as research; teaching- related activities such as office hours, preparing and
marking assignments, preparing and marking exams, exam invigilation, preparing quality files; servicing
community; sustaining activities.
Costs of each activity=total estimated time to perform the activity* practical capacity rate (Table 7)
Table 7. Allocating accounting program costs to its main activities
Main Activities
Costs of activities/ Semester
Estimated Time In Minutes(1)
Practical Capacity cost rate(2)
✓
✓
✓
Teaching Related Activities
✓
✓
✓
Research
✓
✓
✓
Community Services
✓
✓
✓
Sustaining Activities
✓
✓
✓
Total Activities
✓
✓
✓
Teaching Activities
Source: Prepared By the Researcher.
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(Table 6 and 7) can be repeated for all other academic programs at college of administration and finance.
6.4.5 Unit Cost per Student in Academic Programs
TDABC assumes students consume activities rather than costs. Therefore, unit cost per student for each main
activity in each academic program can be calculated by dividing the numerator, costs of each main activity
consumed by students over the denominator, no, of students benefiting from this activity. (Table 8)
The cost of unused capacity for each academic program can be calculated by the following equation:
U c= (t t-c t) c r Where: u c, stands for cost of the unused capacity, t t, stands for total time consumed by all main
activities, c r, stands for practical capacity rate.
The idle capacity in each resource center exists if total time consumed by the main activities is less than the
practical capacity supplied in each resource center, in other words the demand for the capacity by the main
activities is less than the supplied capacity by the resource center.
Table 8. Unit cost per student in accounting program
Main Activities
Cost per student / Semester
Costs of activities (1)
No. of students (2)
✓
✓
✓
Teaching Related Activities
✓
✓
✓
Research
✓
✓
✓
Community Services
✓
✓
✓
Sustaining Activities
✓
✓
✓
Total Activities
✓
✓
✓
Teaching Activities
(3)=(1/2)
Source: Prepared by the Researcher.
7. Conclusion
The process of allocation of overhead costs is still a chronic problem in cost and managerial accounting for many
decades ago. Traditional costing system uses volume based allocation bases such as direct labor hours or
machine hours. This system criticized that it miscalculates costs of goods and services due to its assumption that
products and services consume costs rather than activities.
In response to the dissatisfaction of the traditional costing system, ABC has been developed as an alternative to
better allocate overhead costs using multiple transaction cost drivers and assuming that products and services
consume activities rather than costs. Implementation of ABC proved that it is expensive, time consuming,
subjective and arbitrary process.
In response to the dissatisfaction of ABC, TDABC has been developed to overcome the disadvantages of ABC
assuming that time is the main cost driver of overhead costs and focusing of activities within resource centers
rather than in separate activity centers as in ABC.TDABC helped in detecting any idle capacity in each resource
center. However, TDABC is theoretically appealing; the implementation of it is a challenging process in general
and in universities in particular because of many cost objects need to be calculated.
Because of not all previous studies developed a comprehensive and practical framework to implement TDABC
in universities, whereas no answers are given to the raised questions by the researcher.
This research proposes a guide to answering the previous questions and implementation of DTABC in SEU.
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Copyrights
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license (http://creativecommons.org/licenses/by/4.0/).
78
MGT685: Capstone (Simulation)
Course Duration: 12 weeks
I. Description
The Capstone is a culminating course designed for EMBA students in their final semester. The
course offers an opportunity for students to apply the knowledge and skills they have acquired
throughout their EMBA program to solve real-world business problems. Students will have the
option to choose from one of two project options.
The course will focus on the development of key competencies, including critical thinking,
problem-solving, and decision-making, as well as effective communication and collaboration
skills. Students will work individually and will have the opportunity to seek guidance and feedback
from their supervisor.
Project Options:
A. Scientific Research
B. Business Simulation
A. Scientific Research: Students selecting this option will conduct a scientific study on a business
problem, utilizing a typical research structure, including introduction, research hypotheses,
methodology, discussion, recommendation, limitation, and conclusion.
B. Business Simulation: Students selecting this option will create a full business plan for a new
startup business, including necessary evaluations and decisions about product design, marketing,
finance, and other aspects of the business. Students will be required to conduct thorough
situation analysis, and industry and environmental analysis. The analysis will include a variety of
models, such as SWOT analysis, Porter’s Five Forces, PESTEL, Ansoff Matrix, BCG Matrix, Balance
Scorecard, and others, to identify potential strategic solutions.
Students will rely on the knowledge gained from all courses taken during their EMBA journey
including economics, finance, organizational behavior, strategic management, and more, to
make strategic decisions and develop an effective and realistic business plan.
II. Learning Outcomes:
A. Knowledge and Understanding
1. Demonstrate an understanding of business and management knowledge to
independently identify a business problem and determine its scope and scale, whether
through research or analysis of a real-world business case.
2. Apply business knowledge and insights to make informed strategic and tactical decisions.
B. Skills
3. Develop effective and persuasive written and oral communication skills in expressing
ideas, research findings, and recommendations.
4. Develop sound solutions and recommendations to business and social problems and/or
opportunities by researching, analyzing, synthesizing, and evaluating information using
qualitative and quantitative analytical reasoning.
C. Values
5. Develop an understanding of ethical principles and practices and apply them in complex
and ambiguous situations.
III. Weekly Schedule:
Week
1
Topics
Introduction to
Capstone Options
Suggested Readings (for additional knowledge)
Suggested reading:
• Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A
handbook for visionaries, game changers, and challengers. John Wiley &
Sons.
• Advice for Crafting Thesis Topics – Harvard University:
https://extension.harvard.edu/wpcontent/uploads/sites/8/2020/11/advice_for_thesis_topic_selection.pdf
2
Identifying a
Business Problem
or Opportunity –
Proposal
Development
Suggested reading:
• Master’s Thesis Proposal Tips – University of Idaho:
https://www.uidaho.edu/cogs/resources/student-resources/thesisdissertation/proposal-tips
• Porter, M. E. (2008). The five competitive forces that shape strategy.
Harvard business review: https://hbr.org/2008/01/the-five-competitiveforces-that-shape-strategy
• Investopedia (Porter’s Five Forces):
https://www.investopedia.com/terms/p/porter.asp
• Harvard Business Review (Porter’s Five Forces):
https://hbr.org/1979/03/how-competitive-forces-shape-strategy
• PESTLE Analysis: https://www.tools4management.com/article/pestleanalysis/
• The Top 7 Tried and Tested Strategy Frameworks for Businesses:
https://creately.com/blog/strategy-and-planning/top-strategyframeworks-for-businesses/
3
Developing
Research
Hypotheses
OR
Suggested reading:
Business Idea
(Product/Service
Determinations),
• What is and How to Write a Good Hypothesis in Research?:
https://scientific-publishing.webshop.elsevier.com/manuscriptpreparation/what-how-write-good-hypothesis-research/
• How to Write a Winning Business Plan- Harvard Business Review:
https://hbr.org/1985/05/how-to-write-a-winning-business-plan
• Sample Business Plans: https://summit.sfu.ca/item/13012
• Planning for success: your guide to preparing a business and marketing
plan: https://publications.gc.ca/site/eng/376216/publication.html
4
Conducting
Literature Review
OR
Market Research
(Part 1): (Industry
and Environmental
Analysis)
Suggested reading:
• The Literature Review: A Few Tips On Conducting It – University of Toronto:
• How to Do Market Research for a Business Plan Successfully:
https://resources.pollfish.com/market-research/how-to-do-marketresearch-for-a-business-plan-succeed/
• Industry Analysis In A Business Plan: https://www.educba.com/industryanalysis-in-a-business-plan/
5
Research
Methodology and
Data Collection OR
Market Research
(Part 2): Customer
Analysis and
Marketing
Strategies
Suggested reading:
• Questionnaire Design Tip Sheet – Harvard University:
https://psr.iq.harvard.edu/files/psr/files/PSRQuestionnaireTipSheet_0.pdf
• How to Write Research Methodology: Overview, Tips, and Techniques:
https://research.com/research/how-to-write-research-methodology
• How to Write the Customer Analysis Section of Your Business Plan:
https://www.growthink.com/businessplan/help-center/analyzingcustomers-your-business-plan
6
Data Collection
OR
Financial Planning
(Part 1): Financial
Planning and
Projections
7
Data Analysis
OR
Financial Planning
(Part 2): BreakEven Analysis and
Funding Sources
and Opportunities
Suggested reading:
• 7 Data Collection Methods in Business Analytics- Harvard Business Review:
https://online.hbs.edu/blog/post/data-collection-methods
• Preparing financial projections and monitoring results:
https://www.alberta.ca/preparing-financial-projections-and-monitoringresults.aspx
• How to Write a Financial Analysis:
https://www.thebalancemoney.com/how-to-write-the-financial-analysis2951560
Suggested reading:
• Introduction to SPSS for statistical analysis- University of British Columbia:
https://researchcommons.library.ubc.ca/introduction-to-spss-forstatistical-analysis/
• Free Template to Downloads – Microsoft: https://create.microsoft.com/enus/templates/financial-management
• Financial Projections Template:
https://www.score.org/resource/template/financial-projections-template
8
Discussions and
Findings
Suggested reading:
OR
Operations Plan
• Taherdoost, Hamed. (2022). How to Write an Effective Discussion in a
Research Paper; a Guide to Writing the Discussion Section of a Research
Article. Journal of Addiction and Psychology.
• What Is the Operational Plan Section of the Business Plan?:
https://www.upcounsel.com/operational-plan-sample-in-a-business-plan
• Expertly Writing the Operations Plan Section of Your Business Plan:
https://www.growthink.com/businessplan/help-center/expertly-writingthe-operations-plan-section-of-your-business-plan
9
Recommendations,
Limitations, and
Future Directions
OR
Risk Management
Plan
Suggested reading:
• Organizing Academic Research Papers: Limitations of the Study:
https://library.sacredheart.edu/c.php?g=29803&p=185934
• Organizing Your Social Sciences Research Paper:
https://libguides.usc.edu/writingguide/limitations
• Risk analysis & management: https://scvo.scot/support/running-yourorganisation/business-planning/risk-analysis-management
• Identifying and managing business risk:
https://www.business.qld.gov.au/running-business/risk/identify-manage
10
Research
Conclusion
OR
Conclusion and
Executive
Summary
Suggested reading:
• Organizing Academic Research Papers: The Conclusion:
https://library.sacredheart.edu/c.php?g=29803&p=185935
• Organizing Your Social Sciences Research Paper:
https://libguides.usc.edu/writingguide/conclusion
• How to Write a Conclusion for a Research Paper: Effective Tips and
Strategies: https://research.com/research/how-to-write-a-conclusion-for-aresearch-paper
• How To Write A Good Business Plan Executive Summary:
https://www.upcounsel.com/example-of-a-good-executive-summary-forbusiness-plan
• A Guide to Writing an Executive Summary for Your Business Plan – U.S.
Chamber of Commerce:
https://www.uschamber.com/co/start/startup/how-to-write-an-executivesummary
11
Refining and
Revising Project
Final Project
Submission and
Presentation
Follow Project Template
12
No reading
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Turnitin Report
Formatting
Title Page
Citation
Outline
