Time-Driven Activity Based Costing Applications

This document explores various applications of Time-Driven Activity Based Costing (TDABC). It analyzes case studies from healthcare, specifically focusing on treatments for benign prostatic hyperplasia and prostate cancer, and discusses its implementation in a manufacturing company. The document highlights TDABC's advantages in identifying value improvement opportunities, understanding cost structures, and driving provider engagement in costing activities and redesign initiatives.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

MANAGERIAL ACCOUNTING 1
Executive Summary:
ABC and TDABC process came into existence in 1980 and its founder is Robert Kaplan. This
has been analysed that the traditional costing system was not that capable to distribute overhead
in an effective way and this is not able to identify profitable consumers. The first section of the
report focuses on explaining the business activities of the firm. The second section of the paper
focuses on conducting an overall characteristics evaluation along with TDABC concepts. Based
on the analysis of TDABC system and after contrasting with other two models it is concluded
that this model is apt for Boral Limited in Australia. Reason behind this is that the system
provides high visibility of efficiency and analyses the future resource demands. Boral Limited is
experiencing high competition in Australia and globally from CSR limited

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Table of Contents
1. Introduction:................................................................................................................................3
2. Boral Limited Company Profile:.................................................................................................3
3. Time-Driven Activity-Based Costing (TDABC) Theory and Features:......................................4
4. TDABC, ABC and Traditional Costing Differences:..................................................................5
5. Aptness of TDABC to Boral Limited:.........................................................................................8
6. Conclusion:................................................................................................................................10
References:....................................................................................................................................11

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1. Introduction:
The paper has an objective of analysing the aptness of implementing Activity Based
Costing System (TDABC) as per the views of a graduate consultant in a management
consultancy firm. This has been observed that the company which is selected is Boral Limited
that is one of the famous manufacturing companies in Australia (Afonso and Santana 2016). The
first section of the report focuses on explaining the business activities of the firm. The second
section of the paper focuses on conducting an overall characteristics evaluation along with
explaining TDABC concepts. The third part centres on measuring the differences among ABC,
TDABC and process of traditional costing. Moreover, the report also tends to centre on analysing
the aptness of TDABC implementation within Boral Limited.
2. Boral Limited Company Profile:
Boral Limited is positioned as a global construction and building materials organization.
The firm provides materials for construction and building in Australia by means of joint venture
and roof tiles and cladding within United States (Boral.com. 2018). Business segments of the
organization encompass cement and materials which attains roofing and timber products. Joint
venture between Boral Limited and USG Company is accountable for producing and selling of
plasterboard and related products in Australia. Moreover, the company provides a range of
building and plasterboard goods and operates its business through three segments. This includes
Boral Australia, Boral USA and USG Boral that offers a range of services encompassing pallet
pick-up and material technical services (French et al. 2016).

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In this specific paper, Boral Limited in Australia is considered and the management
decides to use TDABC in the firm (Defourny et al. 2016). The major products of the firm
encompass quarry, asphalt, concrete, bricks, concrete placing, masonry, roofing, and hardwood
and softwood timber. This segment of the firm is a key supplier of material and products
employed in building and commercial construction.
3. Time-Driven Activity-Based Costing (TDABC) Theory and Features:
This has been gathered that several issues are related with activity based costing. For
addressing these concerns ideally, TDABC was taken into consideration as it is simpler, cheaper
and highly powerful in contrast to traditional ABC system (Erhun et al. 2015). In account to the
same, it is revealed that TDABC system supports costing process simplification by lessening the
interviewing and surveying needs. This system also facilitates in allocating resource expenses in
business activities prior to getting them within in cost aspects. Such cost aspects might be orders,
customers and in the form of products (Kaplan et al. 2014).
TDABC model supports allocation of cost resources. This might be conducted through
the help of a well developed structure which requires to be aligned with important groups in the
company. This can address several difficulties (French et al. 2016). For this reason, certain vital
characteristics of TDABC includes the below factors:
TDABC is concerned with cost computation associated with supply of resource ability.
For instance, Boral Limited’s management department is deemed to deal with handling
consumer orders. In this process, the TDABC system calculates the expense related with
resource personnel, process of supervision, occupancy along with equipment and
technology provided to the department or process. It segregates the total expense from the

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time capacity which exists from employees carrying cost attained from departmental
work (Öker and Adıgüzel 2016).
TDABC process is associated with using the capacity cost rate for attaining expenses
related with resources of a department. This is by estimating the resource ability demand
which is necessary for each cost aspect. In account with the specific department, TDABC
requires time anticipation in order to process a particular order for consumers. This is the
cause for which it is not necessary for TDABC process to fulfil needs of every consumer.
However, it supports in analysing the anticipated time needed to address specific
demands for consumer orders (McLaughlin et al. 2014). These orders can be automated
or manual, expedited or international orders and fragile goods orders that are linked with
new consumers that do not obtain current credit record. This is the cause for which the
system uses the actual procedures in conducting work in the organization. However this
can limit high difficulties and variations in comparison to traditional ABC process rather
than developing increasing demand. This is in alignment with data estimations on storage
and processing capabilities. For this reason, through TDABC it becomes easier for Boral
Limited in finding variances rather of just getting convinced in using simple and
improper ABC system within process of budgeting (Ridderstråle 2017).
4. TDABC, ABC and Traditional Costing Differences:
ABC and TDABC process came into existence in 1980 and its founder is Robert Kaplan.
This has been analysed that the traditional costing system was not that capable to distribute
overhead in an effective way and this is not able to identify profitable consumers. This is a vital
reason behind the initiation of above two models. Moreover, measurement of activity cost acts as
a major function in the firm (Kaplan et al. 2015). On the other hand, TDABC and ABC costing

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systems gathered capability of calculating overall customer profitability. This might support in
gaining benefits for organizations by collecting suitable and reliable data by realization of cost
driver. The cost drivers are mentioned below:
The quantity drivers, however, these drivers might not be proper despite having lower
expenses
The duration drivers those have lesser correctness and expenses
The intensity driver with high accuracy and enhanced expenditures
For this reason, the vital differences identified among the ABC, traditional and TDABC
systems are explained below:
Traditional costing system:
There are numerous production firms in the current era which uses traditional costing
process in order to allocate production overhead in the production units (French et al. 2016). The
system users make sure that the volume metric acts as a major driver of costs associated with
production overload. Within this system the accountants make sure of production cost allocation
as per the products. The traditional accounting process does not take into account manufacturing
expenses (Laviana et al. 2016). This is associated with a product manufacturing such as
administrating expenses. The organizations use this system of costing mainly in outer financial
reports as value is provided for overall cost of goods sold.
However, traditional costing process acts as an obsolete system of costing for the
production organizations are related with using machines and computers in achieving increased
production. The machines as well as computers outdate the system as it is associated with using
direct labor hours in computing expenses. This leads in inadequate allocation of cost for direct

MANAGERIAL ACCOUNTING 7
labor hours is not a suitable cost driver that can be included in overall product costs (Thaker et
al. 2016).
ABC system:
ABC system supports in providing a detailed overview focused on product cost and the
companies’ use it generally as a supplemental process relied on costing (French et al. 2016). This
depends on some distribution used in the system are distinct from methods used in traditional
system of accounting. Additionally, ABC process makes sure that every business conduct is
associated with product manufacturing linked with distribution of activity cost. The allocated
expenses within every activity is further associated with vital products attained from the
manufacturing (Monroy, Nasiri and Peláez 2014).
The key advantage of this system can be taken into account that includes improving
accuracy of costing. The companies allocate expenses to the goods those are required for some
manufacturing activity. This process reduces product expenses allocation those are not that
important. Some other benefits which are addressed by ABC system include interpretation of
expenses for internal management (French et al. 2016). It also encompasses capability to develop
benchmarking and better understanding of costs associated with the overhead.
Time-Driven Activity-Based Costing (TDABC) system:
TDABC system acts as a major improvement system in contrast to ABC costing. This is
because of the fact that such system takes into account certain benefits which are not provided by
ABC system and they are mentioned under:

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TDABC system exists in accordance with consumer relationship management system as
well as enterprise resource planning (French et al. 2016).
This process may not attain high transaction amount within rapid processing time by
employing the ERP process.
Moreover, the system uses simple time estimations for lessening the need of conducting
subjective interview as well as survey process in explaining the cost drivers.
Finally, TDABC system can be developed rather than initiating an apt ERP process in
analysing all related costs.
5. Aptness of TDABC to Boral Limited:
Based on the analysis of TDABC system and after contrasting with other two models it is
concluded that this model is apt for Boral Limited in Australia. Reason behind this is that the
system provides high visibility of efficiency and analyses the future resource demands. Boral
Limited is experiencing high competition in Australia and globally from CSR limited (Hofmann
and Bosshard 2017). This ensures that it needs decreasing necessary manufacturing cost.
TDABC system supports the firm in attaining competitive benefits by maintaining support or
indirect cost in a way that can facilitate attaining suitable resource consumption overview along
with requirements from the customers’ side. It also evaluates services provided by the
organization. Boral Limited can deal with managing resources in an effective way by lessening
necessary expenses which might further support in attaining competitive pricing structure. A
project’s per unit transaction expense and consumer opinion might lead to efforts in lessening
such costs. This can also eliminate quality and pricing variations in company’s products
(Papadaki and Popesko 2016).

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In addition, it is important to observe services offered by TDABC that includes online
services in contrast to the ones provided by traditional channels this is effecting decisions of the
management (Inverso et al. 2015). For online services, Boral Limited’s management can gain
cost-based information which includes high indirect costs such as designing and operations of
website, research and advancing from being a traditional staff to be highly skilful. In contrast,
per unit costs can be gradually decreased in case of online services due to high market presence
which is reported by the online service provider. The geographical as well as physical locations
are considered having lesser limitations on the same. Boral Limited’s management can use
lessened over unit service expense in providing competitive and apt costing for online cement
and line goods. This is the cost for which TDABC theory can support the organization in
sustaining expenses related with providing online services. This is different from the cost of
providing the same through employing traditional channels (French et al. 2016). This can
support the management in determination of service to be provided traditionally along with the
ones those are to be provided through online medium.
Additionally, such process provides management with better picture on overhead
expenses for it offers a detailed information on activities related with providing traditional as
well as online services. This is the cause for which, Boral Limited is deemed to be able in taking
decisions on improving consumer base, lessening costs and offering better services. This system
acts as a platform that offers vital and suitable data to the managers quickly and in lesser cost.
Other than focusing on the business type, the model provides better and easily accessible
information related with the cost. This can be considered as better in contrast to ABC model.
Hence, TDABC implementation within Boral Limited can support in lessening manufacturing

MANAGERIAL ACCOUNTING 10
expenses and enhancing revenue base that can improve chances of gaining competitive
advantages in the construction sector.
6. Conclusion:
After the report completion, this is revealed that TDABC acts as an innovative process of
budgeting. This supports in simplifying technique of costing by means of lessening the need of
interviewing and surveying staff. This also facilitates in allocating resource expenses in activities
prior decreasing the expense objects. In addition, TDABC process also includes consumer
relationship management system and enterprise resource planning. Additionally, this is also
gathered that TDABC model is increasingly apt for Boral Limited. The vital reason is that these
systems provide high visibility in analysing capacity effectiveness and for attaining capability for
forecasting future resource demands.

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Afonso, P. and Santana, A., 2016. Application of the TDABC model in the logistics process
using different capacity cost rates. Journal of Industrial Engineering and Management, 9(5),
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Boral.com., 2018. Annual Report. [online] Available at:
https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-
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Defourny, N., Dunscombe, P., Perrier, L., Grau, C., Coffey, M., Van Loon, J., Gasparotto, C. and
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Logistics Management, 47(8), pp.712-735.

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Inverso, G., Lappi, M.D., Flath-Sporn, S.J., Heald, R., Kim, D.C. and Meara, J.G., 2015.
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