ACTIVITY BASE SERVICE COSTING

Activity Base Service Costing: A practical approach service-costing and target pricing framework for Training and Further Education, South Australia (TAFE SA)

Table of Contents

CHAPTER NO 1: INTRODUCTION3

Research Aim3

CHAPTER NO 2: LITERATURE REVIEW4

CHAPTER NO 3: RESEARCH PLAN6

Methodology6

Research Question6

Hypothesis6

Scope and Problems7

Time Line7

CHAPTER NO 1: INTRODUCTION

The study is related to activity base service costing which particularly focuses on the practical approach service costing and also the target pricing framework. This phenomenon is important and imperative to study as for South Australia training and further education campuses, it is vital to have association between the approaches to service costing and framework of pricing for training and further education.

It is observed that there is inappropriate pricing strategy and cost estimation in market which is affecting the success of business model. This include that the prospective and existing customers are not contented with charges and fees, cross cost subsidization leads spiral death, it allows the other private vocational training providers move to towards South Australia VET market and derisory information for the respective educational managers decision making about the day to day operation of the courses.

Research Aim

The aim of this study is to provide a framework based on service-costing for South Australian training and further education campuses as it will facilitate the campuses in having effectiveness in operations while providing vocational assessment and training services through external and internal mode.

CHAPTER NO 2: LITERATURE REVIEW

In relation to association between service costs and competitive pricing of training and further education of South Australia campuses, it is important to know that there are three basic factors to consider in the pricing of services like training and further education are the customers, competition and costs (Langfield-Smith, Thorne and Hilton, 2005, 16-28). In this context, two approaches are basically used for information from the management accounting which include the cost-plus approach, which uses a formula that adds a margin as a starting point for the competitive pricing decision in services.

There are various different costs such as absorbents or total production which can serve as cost basis by applying the cost plus formula, after prices are modified based on customer reactions and responses of competitors (Thorne and Gurd, 1995, 50-57). The pricing approach which is most used today in the service industry like training and further education of South Australia campuses is the target cost, which first sets the target price that are being willing to pay customers for training and further education service. A target operating income per unit is subtracted from the price target in order to determine the target cost per unit (Thorne, 1995, 7-19). The challenge for the organization is to make the necessary improvements to their costs through value engineering and continuous improvement.

The service costs and competitive pricing decisions are strategic decisions about what to charge for training and further education services of campuses. These decisions affect the company's sales and therefore affect revenues and also the profits (Thorne and Gurd, 1999, 173-194). For that reason, it is essential and necessary to analyze how service costs ...