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Report on Aspect Analysis of TDABC

   

Added on  2020-05-16

12 Pages2872 Words80 Views
Running head: MANAGERIAL ACCOUNTINGManagerial AccountingName of the StudentName of the UniversityAuthor’s Note
Report on Aspect Analysis of TDABC_1
1MANAGERIAL ACCOUNTINGIntroductionCost Accounting is a crucial aspect for the manufacturing companies as it helps theaccountants in recording, classifying, analyzing, summarizing, allocating, and evaluatingdifferent types of course of action so that manufacturing costs can be controlled (Drury 2013).Two of the most used costing approach is Activity Based Costing and Traditional CostingApproach. However, for overcoming the step backs of these costing approaches, most of themanufacturing organizations are adopting Time Driven Activity Based Coasting (TDABC) as itis an effective costing system for the companies. In the year 2004, Robert S. Kaplan and StevenR. Anderson introduced this costing approach so that the companies can increase theirproduction by minimizing the overall cost of production (Christ and Burritt 2015). The majorobjective of this report is to conduct an in-depth analysis on the various aspects of TDABC sothat its suitability in the organizations can be examined. For this report, Australian Paper Pty Ltdis taken into consideration. Description of the ClientAustralian Paper Pty Ltd started their business operation in 1938 and the company iswell-known for its vertical integration. Australian Paper Pty Ltd is majorly involved in theproduction of paper, pulp, stationary products and stationary products. Apart from this, thecompany uses to produce different other products like printing papers, bag, sack, papers foroffice use, lightweight packages, industry papers, linerboard and cardboard cartoons. Theprovided situation states that CEO of the company is interested in changing the current costingsystem and wants to know the suitability of TDABC for their business (australianpaper.com.au2018).
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2MANAGERIAL ACCOUNTINGTime Driven Activity Based Costing ExplanationIn the process of TDABC, the organizational managers use to make the direct assignmentof cost resources with the cost objectives and they do this with the help of two estimates (Kaplanet al. 2014). They are 1) the assignment of cost per time unit for the supply of resource capacityto different cost activities; 2) effective estimation of required time units for performing the costactivities. In the process of TDABC, accountants use to follow six steps. They are Step 1) theproper identification of various cost activities and services 2) proper estimation of the total costsfor every group of resource, 3) the proper estimation of the capacity of practical time for everygroup of resource, 4) right calculation of unit costs of every resource group; 5) to determinerequired estimated time to perform each cost activity, and 6) to multiply unit cost of each groupof resource by the estimated time to perform each cost activity (McLaughlin et al. 2014).Organizational accountants are required to follow these steps in TDABC. FeaturesThe process of TDABC has certain features and the following discussion shows thedescription of these features:In the process of TDABC, accounts do not face many difficulties in the assignment ofcost to different kinds of production activities and thus, it leads to the easy and timelycompletion of tasks (Öker and Adıgüzel 2016).Accountants do not face any difficulties in the integration of TDABC with thecompanies’ existing Enterprise Resource Planning (ERP) system and this processprovides great boost to the overall production process.
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3MANAGERIAL ACCOUNTINGUnder the process of TDABC, the production managers become able in the generation oftimely report of the prediction process (French et al. 2013).It has been seen that the organizational managers become able to utilize the fullproduction facility of the organizations and this aspect proves the superiority of TDABCthan ABC and traditional costing.In the presence of TDABC, the accountants become able to make the correct forecast ofthe demand of required resources for manufacturing (Öker and Özyapici 2013).Organizational managers become able to make necessary changes in the existing costingmodel in a fast way with the help of TDABC and the overall process of not expensive.With the assistance of TDABC, organizational managers and accountants become able toacquire small but information about the production process and it helps in getting thesolution of tricky problems (Siguenza-Guzman et al. 2014).Business organizations do not face any difficulty in the implementation of TDABC as itcan be easily implemented in any kind of organizations. DifferencesThe following discussions shows the major differences of TDABC with other two costingapproaches. ABC vs. TDABC SystemThe inception of ABC was done for encountering the inefficiencies and weak areas of thecosting system under American Accounting Standards. The processes of ABC put largeemphasis on the concept of ‘what has been done in the costing system’ rather than ‘what hasbeen spent in the costing system’ (Emblemsvåg and Bras 2012). Under the process of ABC, the
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