Activity based costing as a means to full costing : possibilities and constraints for European universities

This paper presents possibilities and constraints for implementation of the Activity Based Costing (ABC) method, as a full costing method, at European universities. We investigated the current practice and trends in developing the cost allocation method at universities in the European Union. Precisely, we analyzed trends and current movements at universities in the EU countries and the major problems in setting the ABC method at a university. By using this information, we proposed guidelines for the development of a full costing system at the University of Zagreb that is based on the following parameters: categories of costs, main activities, cost objects and cost drivers. Our paper shows that despite public demands for efficient managing within universities, still, a very small percentage of universities has implemented full costing systems. The most important obstacles for that are: resistance to change, non-reliable data in current account systems, lack of management will and legal barriers. Furthermore, our paper explains that one of the challenges involved in implementing full costing systems seems to be the fact that universities are still income oriented than cost oriented. Nevertheless, positive trends in implementing a full costing method, respectively the ABC method, are obvious. We highlighted universities in Portugal and Liverpool as universities that have successfully implemented the ABC method as well as all drivers, barriers and benefits that came out from that implementation.