Greenfield Hills Apartment: Activity Based Costing in a Service Setting

JAMAR

Vol. 3 · Number 1 · 2005

Introduction

Case Study

I'm concerned about the low usage of our

recreation centre. Many of the residents

that don’t use this facility are complaining

about having to bear its costs. We need to

find out what it's costing us to run this

recreation centre and what it's costing to

run the programs there. Maybe we should

charge for every use of the facility -- but if

we do so, we have to know the costs.

-- Mike Plaxer, GHA General Manager

Greenfield Hills

Apartments: Activity

Based Costing in a

Service Setting

Arnold Schneider*

Abstract

In 1989, Springhill Lake Development

Corporation built the Greenfield Hills

Apartments (GHA) in suburban Milwaukee,

Wisconsin. It is the largest apartment

complex within a 10-mile radius. GHA was

designed to attract young professionals, and

indeed, in 2004 over three-fourths of its

resident population was between the ages of

22 and 40 with a median gross income of

approximately $56,000. Sixty percent of

the heads of household were female. GHA

consists of 20 apartment buildings with a

total of 700 units -- 470 two-bedroom

apartment homes and 230 one-bedroom

apartment homes. In addition, there is an

indoor recreation centre which has a

swimming pool, a basketball court,

a large exercise room with state-of-the-art

equipment, two tennis courts, one

racquetball court, and two meeting rooms.

GHA has had an average occupancy rate of

85 percent since its opening and currently

1,615 tenants live in the apartment homes.

This case illustrates the application of

activity-based costing in a service setting –

a real estate management organisation.

Students are given costs from an income

statement and first need to distribute these

costs to a set of activities. Then, costs need

to be assigned from activities to apartment

units and a recreation centre. Lastly, to

determine the costs of various classes

within the recreation centre, the recreation

centre...