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HI5017 Activity Based Costing, Time-Driven Activity Based Costing
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Holmes Institute Sydney
Managerial Accounting (HI5017)
Added on 2020-05-28
HI5017 Activity Based Costing, Time-Driven Activity Based Costing
Holmes Institute Sydney
Managerial Accounting (HI5017)
Added on 2020-05-28
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Report on Time-Driven ABC System 0[Draw your reader in with an engagingabstract. It is typically a short summary ofthe document. When you’re ready to addyour content, just click here and starttyping.]Report on Time-Driven Activity Based Costing System[Document subtitle]Abasus Solution
Report on Time-Driven ABC System 1Table of ContentsContentsExecutive Summary...................................................................................................................2Introduction and Description of Client......................................................................................2Time-Driven Activity Based Management and it’s features......................................................3Difference between ABC System and TDABC.........................................................................4Illustration showing contrast between Activity Based Costing System and Time-drivenActivity Based Costing...........................................................................................................5How the figure of 2,12,160 has been calculated?...................................................................6Other features of TDABC......................................................................................................7Phases in Time-driven Activity based costing.......................................................................7Conclusion................................................................................................................................10References:...............................................................................................................................10
Report on Time-Driven ABC System 2Executive SummaryLeaving small organisations, Time and cost is a major barrier in ABC enabled organisationswhen the company has nearly 100 activities and 5 Lac cost objects. Consequently, Data andstorage of around 2 billion items would be required if ABC is implemented. Taking otherexample in consideration, Hendee Enterprises, fabricator of awnings (worth $ 12 million)took four days to calculate cost for its 39 departments, 140 activities, 9,000 orders and 44,000line items.TDABC has the ability to handle complex issues. Further it relies on informal managerialestimates not considering complex employee surveys that are subjective. Adding further, it isrelatively flexible enough to accommodate the complexity of operations. Moreover, TDABCcan be installed very fast and can be updated with response to changes in processes & orders.It pinpoints unutilised resource capacity also.Introduction and Description of ClientThe world is changing and change itself is changing. With the passage of time, the Universeof Business and Management is witnessing tectonic shift in Business Environment andBusiness Practices. For Instance, the concept of ABC was popular in 1990’s. In the presentera, without underestimating the utility of ABC System, the concept of ABC system ofcosting has been replaced by better alternative practice – Time-Driven Activity based costing(TDABC). TDABC looks fool-proof and fined –tuned with the need of an hour. However, inreal life it has lost some relevance with the change in facts and circumstances and changingsize of business organisationsThe discussion on the Time-Driven Activity based costing (TDABC) will be explained withthe help of example of Cases Study. The client of Management Consultancy firm is anentrepreneur who owns and manages Hotel. His Hotel provides various services: Food
Report on Time-Driven ABC System 3Services, Room Services, reception of guests, Dance floor, Event management and otherrelated services. He has already implemented Activity Based Costing. Now he has expandedhis operation by infusing $ 100 million dollars. However, he has cost escalation issue.Further, he recently attended seminar on Time-Driven Activity-Based Costing. He wants ananalysis on whether he should replace Activity Based Costing System (ABC) by Time-Driven Activity based costing (TDABC) or continue with ABC system. His objective is toknow the various costs exactly, control cost and expenditure and consequently increase profitmargin.Description of Time-Driven Activity Based Management and it’s featuresBefore 1985, Costing Systems were not advanced and were not prevalent among variousIndustries. However, in 1987, Cooper and Kaplan devised the concept of Activity BasedCosting System (The Economist, 2018). Within few years, it became the buzzword ofCorporates as it solved the cost escalation issues of thousands of companies. However, withthe passage of time and advancement in Information and Communication Technology, thebusinesses became complex and difficult to manage (Miller, 2018).Now ABC system has lost relevance in managing large Organisations as with the passage oftime activities of business have become complex. Moreover, ABC system is difficult toimplement. Adding further it is difficult to maintain (Onlinemasters.ohio.edu,2018).Secondly, ABC system became less effective as this method was not capable of takinginto consideration the complexity of operations of enterprises, was expensive to install andtook long time in implementation. Moreover, when employees are assessed on how muchtime they have spent on various activities, they report partial metrics as they do not discloseidle or unused time (Simplestudies.com, 2018).
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