Work based Project

Further Education (FE) college managers are under increased pressure to present accurate financial information. Government funding methodologies constantly change, annual guidance documents verifies this. Funding streams are increasing in number and complexity. Therefore, managers need an analysis tool to provide timely, effective and efficient information to equip them in decision making when matching funding to costs.

For accounting and analysis purposes each qualification taught in college can be considered an activity. Therefore ABC is considered most appropriate form of costing. A search of the latest academic publications produced many articles relating to Activity-Based Costing (ABC). The table below illustrates articles chosen with their corresponding research philosophies, methodologies and methods used to formulate this report. All five have an epistemological philosophy theory.

ABC is the second most used costing system, standard costing being the most popular and arguments for using ABC were stronger from current users than non-users of the system. This indicates a satisfaction of the user once ABC has been adopted. (Stratton et al, 2009). Results of a quantitative research article provide ample support for the conclusion that ABC methods provide significant value to managers (Waldrup et al, 2009).

Higher Education (HE) has similar accounting requirements to FE and with the introduction to more HE qualifications to FE, the article on HE activity-based management provides an informative case study and models.

From the hypnosis, will ABC provide FE colleges with an effective costing system? Empirical evidence will be analysed combining quantitative and qualitative forms of research.

A questionnaire to all FE college accountants in the UK, questioning the type of costing systems used and satisfaction levels of the users. This primary data will be analysed using computer software process SPSS. The research should be reliable, valid and objective; these factors will need to be taken into account when composing the questions. This quantitative approach to research fits with the philosophical framework of positivism.

Interviews, one-to-one and/or groups, with college managers of ABC systems from similar size college and qualification offer. These will bring a depth of understanding to the research on ABC. This primary data will enable a qualitative approach to the research that is usually subjective. Interview questions are open in nature unlike questionnaire questions that need to be closed to elicit answers that can be coded for analytical purposes.

Further literature reviews on ABC will bring about a triangulation approach to produce an accurate account and reliable research.

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Current changes to FE funding methodology and findings from the review have suggested a gap in knowledge pertaining to ABC in FE colleges. This led to a research question, ‘Is activity-based costing an effective budgetary tool for FE colleges?’

Stratton, W. O., Desroches, D., Lawson, R. A., & Hatch, T. (2009). Activity-based costing: Is it still relevant? Management Accounting Quarterly, [e-journal] 10 (3), pp. 31-40. ABI/INFORM complete.

Grahame, S. (2010). Performance Operations. Financial Management, [e-journal] Jan/Feb 2010, pp. 40-44. Business Source Premier