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Overhead allocation: a cautionary tale!

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  • Robert Luther
  • Neil Robson

Abstract

This paper examines the behavioural consequences of charging/allocating central overheads to profit centres within a UK public sector institution. It is based on actual events at a UK university and the issues are set out in a case study format using correspondence from the profit centre manager to highlight issues of contol and measurement. A number of student tasks are suggested that require students to think beyond accounting numbers and consider the potentially conflicting roles of accounting information. In particular there is a conflict between the need to recover full costs from the University/Head Office perspective and the potential alienation of profit centre managers with only crude models for overhead recovery. The problems caused by inappropriate communication of accounting data and reactions to that data are also considered and instructors may use the case to introduce students to the differences between profit and not-for-profit organizations.

Suggested Citation

  • Robert Luther & Neil Robson, 2001. "Overhead allocation: a cautionary tale!," Accounting Education, Taylor & Francis Journals, vol. 10(4), pages 413-419.
    • Handle: RePEc:taf:accted:v:10:y:2001:i:4:p:413-419
    DOI: 10.1080/09639280110091263
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    References listed on IDEAS

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    1. Trevor Hassall & Sarah Lewis & Mike Broadbent, 1998. "Teaching and learning using case studies: a teaching note," Accounting Education, Taylor & Francis Journals, vol. 7(4), pages 325-334.
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    Cited by:

    1. Mark Huijben & Arno Geurtsen & Jan van Helden, 2014. "Managing overhead in public sector organizations through benchmarking," Public Money & Management, Taylor & Francis Journals, vol. 34(1), pages 27-34, January.

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