Title: Activity-based costing in the public sector and non-profit organisations: towards risk-based approach

Authors: Bakhtiar Ostadi; Reza Zare

Addresses: Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran ' Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran

Abstract: Each organisation is looking for ways and pricing mechanism to reduce their costs; it is essential to use modern ways to manage them. The aim of this paper is to calculate the cost of public sector services held by non-profit training centres and institutions, using activity-based costing (ABC) method according to risk-based approach. It considers cost of risk factors associated with the process. Firstly, the risk factors are identified. Secondly, potential risk factors that were identified are prioritised using failure mode and effects analysis (FMEA) method and with expert opinions. Then, the cost of activity centres is calculated considering the risks. The identified costs have been allocated to activity centres before and after the allocation of risks. The research findings are experimented in a non-profit training centre and institution with one-day training course and 25 participants. The results indicate that there are critical risks in the service delivery process which can affect the costs.

Keywords: cost management; activity-based costing; ABC; risk-based approach; public sector; services' costing.

DOI: 10.1504/IJPQM.2022.120708

International Journal of Productivity and Quality Management, 2022 Vol.35 No.1, pp.1 - 16

Received: 09 Jul 2020
Accepted: 06 Aug 2020
Published online: 04 Feb 2022 *

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