Activity Based Costing : Sports also need Costing

Activity Based Costing : Sports also need Costing

Activity Based Costing (ABC) could be useful to many kind of industries. Let say, manufactures, construction, bank, restaurant, or even a sport organization. The meaning of ABC is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs.

Right now we are going to discuss ABC in sport organization. First, we have to understand what types of cost that are involved, the activities that take part and the products that are produced. As activity cost pools, we could report any type of work that takes place in the organization such as teaching, training, and conducting events.

The activity measure for every activity cost pool can be determined by facilities installations, training hour, and numbers of trainer. Next, we have to allocate the total cost to each of the activity cost pools. The first-stage allocation will help us to distribute the total costs, usually this allocations are based on the results of interviews with employees who have first-hand knowledge of the activities. After the first-stage allocations have been completed, we can move to the next step. Calculating the activity rates is the next step in ABC costing, we could calculate it by dividing total cost and total activity per year. Below is the example of computation of activity rates in sport organization :

Activity Cost Pools	Total Cost	Total Activity	Activity Rate
Training	IDR 240.000.000	4800 training hour	IDR 50.000 per training hour

Now we could use the activity rates to apply overhead costs to products and costumers. For example, there are 4100 training hour and the activity rate is IDR 50.000, so the overhead costs are 205 million. The next step is to prepare management reports, usually the reports is about product and customer profitability report. These reports help companies channel their resources to their most profitable growth opportunities while at the same time highlighting products and customers that drain profits. That’s why ABC is very important because it has been called upon to provide a more accurate picture of cost information and to enhance competitiveness.

Source :

Panagio D. (2007). Activity – Based Costing in Sport Organizations: Theoretical Background & Future Prospects. Retrieved from http://www.choregia.org/22.pdf

Garrison R.H, Brewer P.C., Noreen E.W., Cheng N.S., Yuen K.C.K. (2012). Managerial Accounting : An Asian Perspective. New York: McGrawHill