Managerial Accounting Report on Time-Driven Activity Based Costing for Unicorn Grocery

Managerial Accounting
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Table of Contents
A). Description of firm’s client.......................................................................................................4
B). Description of TDABC and its features.....................................................................................6
C). Differentiation of TDABC from Activity Based Costing and Traditional Costing Method.....7
D). Suitability of TDABC for Unicorn Grocery..............................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
Estimation of cost of a product or service is essential to declare a selling price and different
costing methods are developed time by time in this report study. Costing methods are supported
to identify direct and indirect cost which is involved in a manufacturing process and providing a
service, these all points will be clarified in the below-given report (Geue, 2012). This report is
based on the Unicorn Grocery which is a small sized retailer of UK, this report will provide a full
description of the firm in the starting and then report will explore Time Driven Activity Based
Costing method and its benefits of uses. TDABC is upgraded version of activity-based costing
and traditional costing so it has a large difference from old methods of costing which will be
described in the report. At the end of this report will provide a conclusion of Time-
DrivenActivity-Based Costing and its suitability for Unicorn Grocery.
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A). Description of firm’s client
Unicorn Grocery, it is a retail company working in a grocery retailer sector in the UK. It was
established in the year of 1996 with a small group of people to sale from organic food to
processed food in their own retail outlet (Roggema, 2017). Now, this is the largest independent
wholefood grocery in the UK, the business model of the firm is different from the supermarket
which has helped to it to overcome the business rivalry. The firm has a remarkable growth in its
field for which the firm has won “Best Food Retailer” in the year of 2017 for the category of
BBC food and farming awards. Some of the points are mentioned below which provide a specific
description of the firm;
Product and services:
Figure 1: Product Range of Unicorn Grocery.
Source: Vegan Vox ReviewsUnicorn Grocery, Manchester. 2013
The Unicorn Grocery is working in the organic good on a fair trade; they believe to provide a
quality of fruit and vegetables which are produced by proper organic farming methods to their
targeted customers. Apart from this organic category, they are providing a variety of dry fruits,
pulses, grains, spices, and nuts. The firm is providing a facility of packaging of the desired
quantity of products. It creates a differentiation in between supermarkets and Unicorn Grocery.
Customers can buy several kinds of products as per their needs of quantity. Recently they have
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started another range of products which are hot soups, salads, curries and chilies which are
totally based on their organic food range. Fresh bread is also sold in their outlets which are
manufactured by The Handmade Bakery.
Management structure and employees:
Figure 2: Flat Structure of Management
Source: The Evolution of the Org Chart. 2018.
It is a small sized firm which is using a flat management structure. The organisation is situated in
the Manchester and they are having a limited number of employees to produce their services for
their targeted market. It is totally owned by its investors, they are having around 70 numbers of
employees. All of the employees are working on the same level of management and the firm is
providing the same remuneration to its employees. The flat management structure is providing a
direct authority to owners to make changes if required any. The firm is using democratic working
environment which enables employees to engage in the decision-making process. It is the quality
of the company which has made them superior in their targeted market in a few years.
Business and Turnover:
The firm has performed very well in last few years, it has touched £ 7 million turnover factor in
the last year 2017.As the company is having the focus to provide proper organic veg products to
their targeted customers. They have bought 21 acres land to grown up their own fruits and
vegetables, and to deliver as fast as possible into the market. The firm is working into business to
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customer market and to manage their grip on their targeted customers, they are providing a
quality of product and services as per the demands of the market.
B). Description of TDABC and its features
The TDABC is an upgraded version of activity-based costing which overcomes on all of the
drawbacks of paternal costing methods. The activity-based costing methods cannot be
implemented on a large scale because it creates a negative impact on employee’s performance.
Another thing is that ABC increases the operational cost of an organisation due to lower
productivity of employees. So ABC does not provide better results as per the expectations of the
management in any organisation. The TDABC is the latest model of costing model of costing in
which management analyse the need for resources by transactions and customers (Emblemsvåg,
and Bras, 2012). Features of the TDABC are given in below-mentioned points;
 It is a faster process of costing to analyse the needs of resources for any organisation to
retain its production or services.
 It is mainly based on the customers and each transaction made by the firm in recent days.
 This costing method is mainly focused on the needs of resources by the organisation for
its future.
 It helps to identify cost per time unit to supply a resource into business activity.
 It also identifies time taken in a particular activity for processing of a unit.
Estimation of cost per time unit to supply resources to business activity is based on the formula:
Cost per time unit= Sum of overhead expenses of a particular department/Sum of number of
minutes of employee time available (Kaplan. and Anderson, 2017)
This approach of costing helps to overcome on the technical problems which are involved in the
employee’s surveys. It helps to estimate a time taken in a particular activity. Managers can
estimate the time taken by using this costing method rather than wasting their time on
communicating with employees and it provides accurate results for time estimation as compared
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to employee surveys. By using this method managers can reduce idle time in a particular process
which can help them to increase the profits of their internal production process of a product and
service. As it is an upgraded version of costing method it helps the managers to improve the
utilization of time of employees in the process. By using this method of costing managers can
design a new process to accomplish an activity in any organisation.
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C). Differentiation of TDABC from Activity Based Costing and Traditional Costing
Method
TDABC is a refined costing method which has some additional features from previous costing
methods, these features or benefits creates a differentiation from TDABC. A table is here which
provides difference in between TDABC, ABC, and traditional costing
Basis of difference TDABC Activity Based
Costing
Traditional costing
method
Definition A costing method to
the estimation of
needs of resources in
a particular activity to
decrease the time
taken in each activity.
It is a method of
costing which affix
cost of each activity in
terms of resources,
products and services
consumed in each
activity (DRURY,
2013.).
This is a method of
costing in which all
direct and indirect
factors are calculated
to determine the cost
of a product and
services to determine
the selling price.
Version This is an upgraded
and latest version of
the costing which
enables managers to
calculate direct,
indirect cost, needs of
resources and times to
complete an activity
of production of
products and services.
ABC is next
generation costing
methods which have
helped to managers to
overcome the many of
the traditional costing
methods which are
priority managers.
It is a traditional way
of costing in which
managers just track
the records of direct,
indirect, variable and
fixed cost elements to
calculate the cost of
products and services
(Weygandt, and
Kieso, 2015.). On the
basis of this,
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organisation
determines the cost of
products which can
help them to sell out
their products to their
targeted market.
Objective This costing method
is having an objective
to identify the time
taken of delivery of
resources into action.
The key objective of
this costing method is
to decline idle time
from the process of
production of a
product and service.
The key objective of
this costing method is
to identify the needs
of resources in a
particular activity in
the production and to
assign a cost for each
activity.
The objective of this
costing method to
summed up the cost of
a product into
particular criteria in
financial terms which
can help to a company
to maintain a
particular cost, margin
and selling price of
each unit of products
and services.
Effectiveness It is not simpler to use
in an organisation but
it is effective to
analyse cost and
decrease the time is
taken into different
activities (Ward,
2012).
This is effective for
those organisations
which are target
oriented.
It is a basic costing
method which can be
used by any of the
company to keep
aligned their process
to be profitable in
their pricing of each
unit of product and
services.
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D). Suitability of TDABC for Unicorn Grocery
As the time drove activity-based cost method is an upgraded version of cost, it can be used by
the Unicorn Grocery as well. It is a costing method which has an additional feature to analyse the
time taken of resources available in the activities. By using this costing method the managers of
the Unicorn Grocery can identify those possible reasons which are creating compulsion high cost
of their products. Mostly this costing method is used by the hospitality industry because they are
highly focused on the delivery of their services without investing so much time (Schulze,
Securing. and Ewering, 2012). So as the Unicorn Grocery is also having the focus to deliver a
fresh organic veg food to its customers as soon as possible so it can be helpful for their owners to
identify the loopholes in their services. By using this they can provide their products faster which
can help the company to make a better image within its targeted market. It is not having
additional needs of technical expertise to use it in the firm so the owners of the Unicorn Grocery
can use this method easily in the company.
As the firm is working in the business to consumer market so it is essential for them to be faster
to deliver their products to its targeted market. As the company is having a focus on the quality
in their organic products e.g. fruits and vegetables so they have to decrease the time consumption
within the supply chain management and other activities which are done to accomplish the whole
process of selling products. By using this time driven activity-based costing, owners of the
Unicorn Grocery can identify and eliminate those cause which is working as a hinder in their
business objective. To implement this costing method into the actual conditions, the higher
management is having a need to provide a training to cost analyzers to use this method
effectively. By using this method company can get higher productivity for its employees, higher
profits in the sale of each unit to its customers and firm can provide more quality products to its
targeted customers. Unicorn Grocery has to move on the better accounting and costing methods
which can help them to make a better change in the terms of profits and productivity. The firm
can get better results by using this method and they can attain their organizational objectives in a
better manner.
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Conclusion
On the basis of the above-presented report, it has been concluded that TDABC is more effective
costing method as compare to activity-based costing and traditional costing method. The
TDABC method is having much focus on the time consumption in each activity which can be
decreased by the managers by working on identified causes. It converts the reliability of
managers from their employees to costing methods to analyse the needs of resources and time to
accomplish an activity. Most of the companies now these days are using the latest costing
method to be successful in their fields. Traditional and activity-based costing method is less
effective as compared to them by the TDABC. Time-Driven ABC can be used in any
organisation which is having a need to decline time consumption from activities in the
production of product and services.
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References
 DRURY, C.M., 2013. Management and cost accounting. Springer.
 Emblemsvåg, J. and Bras, B., 2012. Activity-based cost and environmental management:
a different approach to ISO 14000 compliance. Springer Science & Business Media.
 Geue, C., 2012. Spoilt for choice: implications of using alternative methods of costing
hospital episode statistics. Health economics, 21(10), pp.1201-1216.
 Kaplan, S. R., & Anderson, R. S., 2017. Time Driven Activity Based Costing. Harvard
Business School Press. 2011.
 Roggema, R., 2017. Space for Food in the City. In Food Roofs of Rio de Janeiro (pp. 29-
44). Springer International Publishing.
 Schulze, M., Seuring, S. and Ewering, C., 2012. Applying activity-based costing in a
supply chain environment. International Journal of Production Economics, 135(2), pp.716-725.
 The Evolution of the Org Chart.2018. [Online]. Available at https://pingboard.com/org-
charts/evolution-org-charts. [Accessed on 19 January 2017].
 Vegan Vox Reviews…Unicorn Grocery, Manchester. 2013. [Online]. Available at
http://veganvoxblog.blogspot.in/2013/09/vegan-vox-reviewsunicorn-grocery.html. [Accessed on
19 January 2017].
 Ward, K., 2012. Strategic management accounting. Routledge.
 Weygandt, J. J. and Kieso, D.E., 2015. Financial & Managerial Accounting. John Wiley
& Sons.
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