Mail Management Service – How to design an activity-based costing system for service firms

The purpose of this case is to present the design and functioning of an activity based costing (ABC) system in a service firm. The perspective adopted in this case is that of the management accountants and controllers supporting top management in identifying the need for a costing system, its implementation and use. More specifically, the case emphasises the role of an ABC system in a service firm characterised by a relevant growth process, deriving from an increasing number of transactions and new potential customers’ interaction. In fact, in these contexts only costing systems based on activities provide information to analyse the level of profitability of each service and each customer, contributing at the same time to the policy of price definition.