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EXECUTIVE SUMMARY The purpose of this report is to present the pilot Activity-Based Costing ABC for the University The emergence of ABC systems has been viewed as the means by which management accounting can re-establish its relevance It became popular towards the 1980s because it prevents cost distortion and provides a process view with traditional accounting cannot provide The University is considering adopting ABC because the widespread concern about rising costs for higher education and the unique characteristics of universities that make for special challenges The report discusses the various changes in the manufacturing sector with regard to the introduction of ABC and shows how this method can be employed in a higher education institution It also discusses the advantages and disadvantages of using ABC and explains how ABC may or may not help the university control its costs TABLE OF CONTENTS TABLE OF CONTENTS1 INTRODUCTION2 MAIN BODY2 CHANGES IN THE MANUFACTURING SECTOR WITH REGARD TO THE INTRODUCTION OF ABC2 HOW ABC MAY BE EMPLOYED IN A HIGHER EDUCATION INSTITUTION3 ADVANTAGES OF USING ABC3 DISADVANTAGES OF USING ABC 4 HOW ABC MAY OR MAY NOT HELP THE UNIVERSITY CONTROL ITS COSTS4 CONCLUSION4 APPENDIX6 APPENDIX 1 DIFFERENCE BETWEEN ABC AND TRADITIONAL COSTING6 APPENDIX 2 ACTIVITY-BASED COSTING APPLICATION TO HIGHER EDUCATION7 APPENDIX 3 EXAMPLE ON INPLIMENTATION OF ABC7 BIBLIOGRAPHY9 1INTRODUCTION Traditional costing system has been criticised for cost distortion and lack of relevance during the last 20 years Johnson and Kaplan 1987 A new costing method known as Activity Based Costing was developed as a means of overcoming the systematic distortions of traditional costing systems ABC was innovated 50 years ago
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