Adoption of activity-based costing at Technical and Vocational Education and Training in KwaZulu-Natal

Abstract

This study seeks to provide a guide for a more advanced costing method that is going to provide some cost allocation techniques from a wider range of TVET college specific activities, and that will provide a valuable insight for management of a college. Such a method was achieved through the development of a standard activity dictionary and the functional decomposition of the campus into small divisions as the methods of identifying major activities that are performed at TVET colleges. Thereafter, a conceptual framework for adoption of Activity-Based Costing (ABC) was developed. The main expected contribution to knowledge is represented in the development of conceptual framework for adoption of the ABC system in KwaZulu-Natal TVET colleges and the originality in the current study lies in bridging the gap in the knowledge and understanding of ABC system in education sector. In addition to providing a way to allocate resources more efficiently, ABC can help colleges to determine the best way to meet their goal by monitoring the use of resources in particular activities. The theory that forms the basis of this study is contingency theory. This theory explains how ABC system is contingent upon contingency factors including organisational and behavioural and technical variables. This contingency theory suggests that the adoption of ABC systems within public TVET colleges is depend upon, or at least associated with size of the firm, cost structure, product diversity, training, resistance to change, internal champion support and innovation, top management support, internal resources availability and technical variables. The new model of ABC adoption has been developed in order to examine reasons why the ABC adoption remains low. This study also seeks to establish factors that constitute barriers to ABC. The hand-delivery questionnaire was appropriate for data collection in this study. The census survey undertaken comprised six public TVET colleges at KwaZulu-Natal (KZN). Thirty (30) questionnaires were submitted, and thirty (30) questionnaires were returned, generating a 100% responses rate. The quantitative data were processed using a SPSS version 24.0, leading to appropriate descriptive and inferential statistical analyses, including frequencies, means, standard deviations and chi-squares. Nine factors were identified from the literature, seven were found to be statistically significant associated with ABC adoption. The qualitative research method was also used. The research strategy was embedded with multiple cases studies to validate the results derived from the census survey. This was selected to validate the results derived from census survey. The data were gathered via 10 face-to-face semi-structured interviews. The semi-structured interviews were conducted with employees from top and middle levels of the five TVET colleges. The semi-structured interviews and survey helped the researcher to discovered new ways of identifying activities such as using business process and examining the colleges’ organogram. This study found that public TVET in KwaZulu-Natal (KZN) are using the Student Based Costing (SBS) and these colleges do not obtain accurate programme costs because they fail to allocate overhead costs to their respective campuses under costing currently in use in these TVET colleges. This study also found that the public TVET colleges in KZN use a uniform cost (number of students) to assign overhead costs to respective programmes. The findings of this study indicated that ABC has not been adopted at the public TVET colleges in KZN, as 60% of respondents indicated that there is no consideration of ABC to date and 100% of participants also confirmed that their colleges has not been adopted ABC to date. This result confirms that public TVET colleges at KZN are still using Traditional costing system (TCS). This study also showed that eight out of nine factors assist in the adoption of ABC system, and there is positive correlation between these seven factors and ABC adoption. The research findings of this study have exposed some loose ends that could not be answered conclusively by the data, it therefore recommended that a further empirical research should be conducted using case study and survey at all 50 public TVET colleges in South Africa to detect the difficulties and barriers that prevent the adoption of ABC at TVET colleges.