Time-Driven Activity-Based Costing

Kaplan Anderson

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In the classroom, ABC looks like a great way to manage a company’s resources. But many executives who have tried to implement ABC on a large scale in their organizations have found the approach limiting and frustrating. Why? The employee surveys that companies used to estimate resources required for business activities proved too time-consuming, expensive, and irritating to employees.

This book shows you how to implement time-driven activity-based costing (TDABC), an easier and more powerful way to implement ABC. You can now estimate directly the resource demands imposed by each business transaction, product, or customer. The payoff? You spend less time and money obtaining and maintaining TDABC data—and more time addressing problems that TDABC reveals, such as inefficient processes, unprofitable products and customers, and excess capacity. The authors also show how to use TDABC to link strategic planning to operational budgeting, to enhance the due diligence process for mergers and acquisitions, and to support continuous improvement activities such as lean management and benchmarking.

In presenting their model, the authors define the two questions required to build TDABC:
1) How much does it cost per time unit to supply resource capacity for each business process?
2) How much resource capacity (time) is required to perform work for a company’s many transactions, products, and customers?
The book demonstrates how to develop simple, valid answers to these two questions.

Kaplan and Anderson illustrate the TDABC approach with a wealth of case studies, in diverse settings, based on actual implementations.

What will you learn from this book

  1. Cost Allocation: The book likely emphasizes the importance of accurately allocating costs to products, services, or activities by considering the time spent on each activity.

  2. Time Equivalents: Introducing the concept of time equivalents to measure the resources consumed by different activities, allowing for a more precise cost allocation.

  3. Simplicity and Accuracy: Focusing on simplifying the cost allocation process while maintaining accuracy by using time-driven methodologies.

  4. Resource Utilization: Discussing the effective utilization of resources by understanding the time spent on various activities and optimizing resource allocation accordingly.

  5. Costing for Complex Processes: Addressing challenges in traditional costing methods, particularly in complex processes or service-oriented industries, by incorporating time-driven approaches.

  6. Operational Efficiency: Exploring how time-driven activity-based costing can help in identifying inefficiencies and bottlenecks in processes, leading to operational improvements.

  7. Performance Measurement: Using time-driven ABC for performance measurement, allowing businesses to evaluate the efficiency and profitability of different activities.

  8. Decision-Making: Highlighting the relevance of accurate cost information derived from time-driven ABC in making informed strategic and operational decisions.

  9. Implementation and Integration: Discussing the practical aspects of implementing time-driven ABC within organizations and integrating it into existing accounting and management systems.

  10. Case Studies and Examples: Providing real-world case studies and examples to illustrate the application and benefits of time-driven activity-based costing in various industries.

Language English
ISBN-10 978-1-4221-0171-1
No of pages 266
Font Size Medium
Book Publisher Harvard Business School Publishing
Published Date 01 Apr 2007

About Author

Author : Kaplan Anderson

2 Books

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