Activity-Based Costing and Relevant Cost Analysis: An Example of Protective Force Services and Security Upgrades

National laboratories are being encouraged to become more cost effective but their accounting data often impedes identifying the cost of current operational activities. The practice of activitybased costing was developed in the private sector in response to managers' needs for more accurate product and service costs. While ABC is not likely to replace one's cost accounting system, it has proven to be useful in strategic decision-making. This paper provides an overview of ABC, the steps to implement its use and an example within security operations. ABC estimates for protective-force activities were used to illustrate a strategic decision for security upgrades in meeting higher protection standards at a typical nuclear materials research site. Relevant cost analysis was performed with spreadsheet models for three alternative physical protection upgrades: technology, facility modifications, and underground facility. The results of the analysis provided the basis for selecting a costeffective approach to meet increasing protection standards.