Application of Time Driven Activity Based Costing in Botswana Open University

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Commonwealth of Learning (COL)

Financial planning should be premised on the mission and vision of the University. To develop reasonable and accurate financial plans, the institution must balance the supply and demand sides of the financial resources, identifying the average cost of maintaining one student per annum. The costing units are measured in Time (practical hours for labour and non-labour factors). Human labour is the main resource of the University. The direct labour time spent to perform individual activities is used as a measure of activity amount and a basis for calculating costs. This paper reviews the application of Time Driven – Activity Based Costing BOU, as an alternative to the incremental method currently in use. It addresses two significant draw backs of incremental budgeting, the non-relationship between the budget and the organizational strategy and the imbalance between the demand and supply sides of the budget. From the experience at BOU University two conclusions can be made. At the Institutional level, time as primary cost driver allows allocating resource costs directly to objects. This enables management employ linear equations to explore variations in the demand for resource capacity for each variation in activity time. It facilitates calculation of program costs and variables important in management e.g. breakeven point of a program. At the national level, Government may consider funding specific activities based on actual budgets, recognizing that the University’s needs shift according to the dynamics in the higher education demand and advancement in technology, a key delivery mode at BOU. The state will know more accurately the actual cost for a student, the costs of infrastructure and equipment. Taking this approach, the State will be able to balance the increasing competing interests for public resources.// Paper ID 55

Higher Education,Costs and Financing