Strategic common cost allocation: a case study of a public sector organisation in Australia.

Ahmed, Rafiuddin (2004) Strategic common cost allocation: a case study of a public sector organisation in Australia. In: Proceedings of International Management Accounting Conference III (IMAC III), pp. 258-275. From: International Management Accounting Conference III (IMAC III), 12 -13 July, 2004, Kuala Lumpur, Malaysia.

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Abstract

This paper draws on the works of Gal-or (1993) and Cavalluzzo et al., (1998) on strategic common cost allocation in business organisations operating both in business and monopoly segments to provide goods and services to customers. A business unit of a large public sector city council in Australia has been studied to empirically examine how strategic cost allocation is used to prepare a competitive bid in response to changes in the provision of services according to the National Competition Policy (NCP) guidelines. A case study approach has been used and data have been collected through semi-structured interviews, and study of archival documents. The analysis of the results reveals that strategic cost allocation can significantly improve the competitive position and productivity of a business unit in the short term. The sources of such improvement stem from the employees’ sense of urgency to improve efficiency reduce slacks in work processes, re-engineering work processes and finally distancing service provision from funding side through an internal purchaser-provider split. The study also reveals that excessive or unfair common cost allocation, used in conjunction with strategic cost allocation, does not change the status quo of the services provided by the monopoly segments. The study, however, does not endorse the long-term use of such strategic cost allocation because such practice may disadvantage the monopoly segment in terms of cost of service provision or unfairly subjecting services to competition.

Item ID: 832
Item Type: Conference Item (Refereed Research Paper - E1)
Keywords: cost allocation; monopoly segments; business segments; strategic cost allocation
Date Deposited: 03 Nov 2006
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1504 Commercial Services > 150499 Commercial Services not elsewhere classified @ 100%
SEO Codes: 94 LAW, POLITICS AND COMMUNITY SERVICES > 9402 Government and Politics > 940202 Electoral Systems @ 100%
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