Implementing Time-Driven Activity-Based Costing in Accent Group Limited

HI5017 Managerial Accounting
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Table of Contents
A description of your firm’s client..................................................................................................4
b). Describe time-driven activity-based costing and its features.....................................................6
c). in what ways TDABC is different from Activity-Based Costing and traditional costing
systems.............................................................................................................................................8
d). A discussion on whether the TDABC is suitable for your firm's client:..................................10
Conclusion.....................................................................................................................................11
References:....................................................................................................................................12
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Introduction
In the company Accent Group Limited, a graduate consultant has been appointed to evaluate the
budgeting system. The company is currently working as per the activity-based costing system
and in this report, the consultant will identify the importance of implementing the time driven
activity-based costing system. In this report, there will be a detailed description of the company
which will include all its strategies, objectives, etc. The report will describe the TDABC system
including its features through which the company will be able to understand the need to
implement it. The report will further include the comparison of the traditional system and
activity-based costing system with the TDABC system. Lastly, the report will discuss the
suitability of the time driven activity-based costing system if it is implemented in the company
Accent Group Limited.
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Report:
A description of your firm’s client
Solution
Accent Group Limited:
Accent limited is a retailing company that has been indulging in providing quality social housing
products and housing for rents and sale from last 50 years. This company has been firmly
committed to providing individual residents with excellent quality of homes and residents. This
company allows people to explore great experience related to qualified services that people have
right to expect. In a current year after 2016, a company has been engaged in managing 21,500
homes and residence for rents and sales & around 31,600 residents on call home. This company
is basically located in Middlesbrough, Burnley and Camberley, Australia to manage it's all
projects. Main headquarter of the company is in Shipley, West Yorkshire based on Yorkshire
management team.
Accent Vision:
Company major vision is to provide improved and innovative and secure homes to their clients.
They have set three major objectives to achieve company’s goals. These are improving homes,
improvisation in communication with their clients and lives and deliver personal, modern and
better services (Accent Group Limited, 2018).
Accent values and core activities:
The major and core values of a company is to adopt R.C.D.O.H. Sum-up of respectful, creative,
dependable open and honest values for which company stands for. The company focuses on such
core activities in which such elements seem to be relevant.
Respectful: company builds and provides their business to their customers and motivate their
employees to get effective results regarding their customers and partners.
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Creative: company encourages its employees and rewards creative ideas that help continue to
improve their services and make them more profitable for customers and partners.
Dependable, open and honest: company believes in integrity and increment in brand value by
fulfilling the customers' demand & company's performance and growth. A staff of the company
is creative and transparent in all integrations related to providing value and quality services
(Accent Group Limited, 2018).
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b). Describe time-driven activity-based costing and its features.
Time-driven activity-based costing is the modified approach of traditional costing system. It is
the more simplified form of Activity Based Costing and as such tries to overcome the weakness
of the traditional costing system and Activity Based Costing. It helps to reduce the workload of
the planning managers by simplifying their working procedure. The meaning, significance as
well as the scope of time driven activity-based costing can be better understood by understanding
their features and characteristics which are explained below:
Determine the resource capacity: A prominent feature of time-driven activity-based costing is
that it determines the maximum possible capacity of the resources required in the production
process. According to Kannaiah (2015), under traditional costing systems, the productivity of the
concerned employees or workers is given more weight. However, it may be possible that the
workers are working to their capacity to the extent possible (Kannaiah 2015).
Flexible cost accounting system: Another major dominant feature or characteristics of this
modern costing system is that it is flexible. As such, organizations that desire to expand its
operations can easily go for this costing system. Most cost accounting systems lack this feature
and as such, they find it difficult when they go for diversification or expansion. This feature
makes time-driven activity-based costing a successful cost accounting system.
Determination of actual capacity of employees: With the help of implementation of time-driven
activity-based costing, actual productivity and working capacity of the employees can be
determined since it takes into consideration all the factors affecting the determination and
evaluation of productivity of all the employees. This will help in elimination or minimization of
non-productive time and accordingly cost management can be done effectively.
Correct determination of cost of cost objects: According to Basuki & Riediansyaf (2014), the
various tools and techniques of time-driven activity-based costing will assist in the determination
of correct cost of all the cost objects. This will bring the actual and more appropriate result to the
top level management. They can take better decisions in order to successfully operate, manage as
well as expand its operations. This is necessary for the survival and existence of each and every
business corporate (Basuki & Riediansyaf, 2014)
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Single cost driver: Time-driven activity-based costing involves the determination of a single cost
driver namely, time. However, under traditional cost accounting systems and activity-based
costing system, all the possible cost drivers are determined and their associated costs are
considered during cost analysis. Sometimes, cost accountants find it difficult to correctly choose
the cost driver. It will create a chaos for them and accordingly cost of cost units may be wrongly
determined. This reduces the complexity and consequently helps the strategic manager to focus
on core areas.
Suitable for big corporates: Another major and influential feature of this modern costing system
is that unlike traditional costing system or activity based costing, time-driven activity-based
costing is for each and every business corporates (Kannaiah, 2015). The organization operates at
big level can easily implement time-driven activity-based costing. It also helps in maintaining
coordination and establishing a relationship between all the departments of a concerned
organization. Since it is easy to understand, other departments can also cross verify the result or
outcome of this costing method
Integration of costing and accounting principles: The basic feature of time-driven activity-based
costing is that it helps in integration of costing and accounting principles which makes it easier
for the senior manager to find the relationship between outcome produced by applying costing
and accounting principles (Kannaiah, 2015).
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c). in what ways TDABC is different from Activity-Based Costing and traditional costing
systems
ABC system is a system, which allocates the overhead in a precise way where the cost is
allocated on the basis of the cost drivers. The ABC system will be used when the company is
required to reduce the cost as per the target. There are many organizations whose business is
complex and the management is not able to sort out the activities or the products, then ABC
system is the best method to simplify the process (Gravis, et. al., 2010). The activity-based
costing system assigns the cost of the product through which the overhead is being incurred.
Then the cost is assigned to the product where they are actually making a demand for the
activities. The ABC system has been of great importance due to the following ways:
 Increase in the overhead relating to the manufacturing.
 The overhead relating to the manufacturing is not related to the machine hours or the
labour hours.
 The customers demand and preferences have been changed.
 The batch sizes of the products have been changed.
 The traditional system is a system which is used by the company so that the management
is able to identify the profits. The direct and indirect costs and expenses are being
considered in the traditional system. The traditional system is not a better system for the
companies due to the following reasons:
 The expenses which have incurred in the process are sometimes not expected by the
company.
 Profits are not estimated correctly.
 Total cost to manufacture the product increases rapidly due to the unexpected expenses.
 Though the traditional system has many deficiencies, the company uses this method since
it is simple to use (Stout, & Proper, 2011).
 The TDABC system is better than the ABC and the traditional system in the following
ways:
 The TDABC system is less expensive in comparison with the other two methods.
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 The subjective or the survey method is not used in the TDABC system since it is only
based on the time estimates.
 The transactions which are complex in any organization have become simpler due to the
use of TDABC system.
 The time for the transaction has been particularly accurate and the need has been
removed to track the activities that are multiple.
 The TDABC system is easy to maintain and can be easily updated according to the use of
the market or the environment.
 If there is capacity which is available with the company or any capacity which is
underutilized, the TDABC system can easily identify them.

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d). A discussion on whether the TDABC is suitable for your firm's client:
Accent limited company deals in home appliances and believes in providing value and quality
homes and resident to their customers. As the company has been engaging in providing high-
quality social housing to their customers for last 50 years, so Application of TDABC is necessary
the be implemented in the business activity for firmly committing regulation of costs and
valuable products. A company is currently engaged in building 21,500 homes and residents for
their customers. For proper execution of mission a bison of the company, they should install
TDABC tool to understand the additional requirement of cost and funds so that proper training
could be provided to their staff and cost measurement could be possibly done through using
TDABC (Öker & Adıgüzel, 2016).
A requirement of TDABC:
Cost measurement:
TDABC is the planning tools which allow the company to measure actual requirements of funds
to minimise the costs. It is medium of assigning whole cost requirements so that company could
be able to allocate cost resources properly. Uses and implication of traditional model of the cost
would be time-consuming and costly but an application of TDABC model is logistics and based
on analytical process. It helps the company to enhance the company's productivity and profits on
time (Thomas & Gilbert, 2014).
Analytical process:
TDABC is the modern planning tools which are based on cost-based analysis, it allows the
company to evaluate cost and benefit relation so that minimisation of cost and profit
maximisation could be easily done. Through TDABC company would be able to achieve their
organisational goals and TDABC would able to figure out actual position of the company after
financial forecasting. So it is necessary to use TDABC concept to improve business capacity and
productivity (Namazi, 2016).
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Conclusion
From the report above it can be concluded that the company is currently applying ABC system
which is though beneficial for the company Accent Group Limited but the ABC system has some
deficiencies which can be removed if TDABC system is implemented in the company. The
company has identified the importance of TDABC system in the above report and it has been
concluded that the TDABC system is the best suitable method for the company to simplify the
process in time equation manner. The report concludes that the company has many products or
activities where there is a requirement of a more precise and a simplified system. The TDABC
system is the method which is better than the traditional system as well as the ABC system as it
is concluded above from the report. The report further concludes with the advantages of TDABC
system over the ABC system and the advantages if the TDABC system is implemented in the
company.
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References:
 Accent Group Limited, 2018. About us. Accent Group Limited. Namazi, M., 2016. Time-driven activity-based costing: Theory, applications and
limitations. Iranian Journal of Management Studies (IJMS) Vol. 9, No. 3, Print ISSN:
2008-7055 pp. 457 – 482
 Oker, F., & Adıguzel, H. 2016. Time‐driven activity‐based costing: An implementation
in a manufacturing company. Journal of Corporate Accounting & Finance, 27(3), pp. 39-
56.
 Thomas, D. S., & Gilbert, S. W. 2014. Costs and cost-effectiveness of additive
manufacturing. NIST Special Publication, 1176, 12.
 Van Der Aalst, W. M. 2013. Business process management: a comprehensive
survey. ISRN Software Engineering, 2013. Basuki, B., & Riediansyaf, M. D., 2014. The Application of Time-Driven Activity-Based
Costing In the Hospitality Industry: An Exploratory Case Study. Airlangga University. Kannaiah, D., 2015. Activity Based Costing (ABC): Is It a Tool for Company to Achieve
Competitive Advantage? International Journal of Economics and Finance.
 Stout, D. E., & Proper, J. M., 2011. Implementing time-driven activity-based costing at a
medium-sized electronics company. Management Accounting Quarterly, 12(3), 1.
 Gravis, M., Levant, Y., & Ducrocq, C., 2010. Time-driven activity-based costing
(TDABC): An initial appraisal through a longitudinal case study. Journal of Applied
Management Accounting Research, 8(2), 1.
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