Enhancing cost implications of Mapping by activity based costing (ABC) -
Case study for National Mapping Agency in Thailand
Methodology of collecting data on activities and cost
There are many techniques available for the collection of data on cost and time performance needed for ABC. Data was collected from interviews, time registration sheets, and documentation reviews. This is because firstly, it normally turns out that no one method could provide complete and accurate information. Even if it were, there should be a means to validate it through other sources. Another reason was the current accounting system was not consistent. Most cost records were held manually and paper based. Therefore, it was difficult and time-consuming to collect these. It was found that, for example, cost of material and equipment were aggregated in one amount and the financial section could not prescribe the history of detail for which item they had spent. For that reason, the organisation should improve in more efficient terms on cost accounting system in order to provide a transparent financial management. Lastly, there were some demonstrated deficiencies in the knowledge base of some of the internally trained accounting staff. BMT has been largely based on GI related technical jobs, with most of officers being surveyors and survey engineers. Therefore, they could not yet have very good working knowledge of the traditional accounting system, let alone knowledge in Activity Based Costing and Management. However, these data collections are needed to develop because of the complexities in getting approval to involve the entire staff. Even if it were possible, it is by no means deemed a job for a single person to undertake. Time for data collection was only about three weeks making it virtually impossible to cover everything. Extra time would have been needed to accomplish this limitation.
There are numerous methodologies of how to conduct interviews described in Kumar (1996, p.115). As also noted in Kumar (1996), the advantages of this method are more appropriate approach for studying complex and sensitive areas and useful for collecting in-depth information, which can provide the best understanding of the job. Interviews were however necessary because of the complex organisational situation in this case study. Generally, the relevant pieces of information on activities were acquired through interviews in the absence of the relevant documents from which such information could be extracted.
From the experience gained during fieldwork duration, before the interviewing took place, background information was gathered in order to answer some of the questions, for example, memory intensive questions and the trivial ones. Brimson and Antos (1994) suggest that the process should interview as few people as possible and always begin with the department manager or as higher position as possible because of experience and technical skills. Moreover, it is politically important to gain his or her support with guidance and suggestions. Aside guidance and suggestions, it also lends a psychological support to the interviewing process when it comes to dealing with the subordinates. Therefore, the fieldwork started by interviewing the surveyor general.
Each interviewing process started by explaining the purpose, and briefed the interviewee about ABC and its benefits. The logic behind is that if a person being interviewed does not know why they are being interviewed, they will often assume the worst. Therefore, explaining the objective of interviewing is very helpful in gaining their trust. This method has been used for this research in order to gain knowledge of accounting system and budget allocation within BMT, the conditions and criteria that have been used to manage the budget. The information from fiscal year 2001 (FY2001) was collected with regards to activities, resources, and all relevant data for ABC analysis. The following were interviewed: surveyor general, director of surveying and mapping division, chiefs of sub-divisions, supervisors, and the officers of supply & human resource, and financial sections. This method was applied to establish the time spent for each activity in order to get the activity model by interviewing head of every operational element. Retrospectively, perhaps a better method could have been by using time registration sheet, because it turned out that by interviewing the data obtained was largely by the intuitive guesses over years of experience. The fieldwork report has been signed by surveyor general in order to approve the correctness and accuracy of the data and information.
Time registration method was used to collect the time spent for each particular activity from a sample representative set i.e. director of division, chiefs of sub-divisions, supervisors, survey engineers, surveyors, administrators, employees, etc. It was used to calculate the time spent to manage and support the operational elements. The experience found that managers and support staffs were not likely to be enthusiastic about filling in time registration sheet on daily basis. Some even looked upon those sheets as being instructive. Some of them did not fill in properly because of lack of attention or suspicion of its purpose. It came as no surprise as Turney (1996) has already stated as being some of the reprisals.
Using data collected and the knowledge learnt from literature review, the analysis of existing situation of BMT was generated. The analysis of products, activities, resources, and their costing was made (and indicated in Appendices). The current cost accounting at BMT and ABC approach was made for comparisons. The ABC model’s behaviour has been tested under various conditions in spreadsheets since the application of spreadsheets was found useful for the ABC calculations. One main advantage of using spreadsheet software is that it allows the chaining and referencing of the calculated results to serve as inputs for consequent calculations while maintaining the referential links to the original values. This reduces the amount of rework that may be necessary when a value is changed and also makes it more appropriate to support “what if” analysis. Such “what if” analysis could aid decision-making process by providing a picture of what the effect of particular actions may have on the activity costs. It is sufficient to say that this activity model prepared will not be the last but the first of perhaps the many to be modelled. It may only last for a period and the ever-changing conditions may require it to be readjusted if not modelled completely. The activity model would obviously require considerable input and rework in order to be useful in planning and decision-making tool in the future for the whole organisation. This model can be a good start to enhance the input, and speed up the process.