Introducing activity-based costing at the University of Malta

Abstract

Purpose: This research study evaluates the implementation of Activity-Based Costing at the University of Malta and looks at each of the elements of this system in greater detail. This costing method offers a number of advantages over the traditional systems and therefore, such a process is required in order to render this institution more efficient. Design: Due to the nature of the study, this research project takes a qualitative approach (mainly by conducting interviews, setting meetings and communicating via emails and telephones). In addition, the process is analysed from two perspectives: firstly from the point of view of the Finance Department and secondly, from the point of view of the academics. This is because Activity-Based Costing affects the whole institution and, consequently, one has to study the impact on all persons involved before actually introducing the process. Findings: The findings represent the process according to that designed by the Finance Department. However, while Activity-Based Costing should promote accuracy, an element of subjectivity is noted during such evaluation, requiring further suggestions for improvement, intended to eliminate arbitrary allocations as much as possible. Conclusions: The author concludes that, with careful and systematic implementation, and taking into consideration the author's recommendations which aim at achieving accuracy, Activity-Based Costing shall promote more cost efficiency and transparency. More importantly, such a costing system should remain accompanied by long run updates and improvements so as for it to remain useful for such an academic institution. Value of the study: Activity-Based Costing is one of the very important projects currently being introduced at the University of Malta and therefore