The Suitability of the TDABC for a Company

Running head: THE SUITABILITY OF THE TDABC FOR A COMPANY 1
The suitability of the TDABC for A company
Name
Institution

THE SUITABILITY OF THE TDABC FOR A COMPANY
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THE SUITABILITY OF THE TDABC FOR A COMPANY
Executive summary
The main discussion presented in this paper is how the Time Driven Activity-Based
Costing (TDABC) has surpassed the traditional models and the Activity Based Costing. This
paper has chosen the Sanic Hotel, a medium-sized Hotel company and presented a detailed
background alongside how this firm can use the TDABC in its budgeting system. This has
helped showcase the effectiveness of TDABC approach over traditional approaches. A detailed
description of TDABC is presented including its features and the differences between TDABC
and Activity-Based Costing and traditional costing to justify the need for firms to apply TDABC
approach in their operations over traditional approaches and ABC. Further, a comprehensive
discussion on whether the TDABC is appropriate to the Sanic Hotel is presented. It is discovered
that by effectively using TDABC approach, the Hotel will meets the needs of its budgeting and
costing. This, therefore, will give the CEO of Sanic Hotel a justification for the suitability and
appropriateness of TDABC implementation. This is because it is noted from the discussion that
TDABC effectively aligns to the managers’ work of making decisions with the aim of increasing
the profitability of the firm’s services or products. The suggestion derived from the report is that
TDABC approach is important for the analysis of the organizations profitability and cost. The
TDABC approach remains the most effective tool for the company decision making process.
Thus, there is a need for Sanic Hotel to employ TDABC over the traditional models or ABC
when costing.

THE SUITABILITY OF THE TDABC FOR A COMPANY
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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Description of the company (firm’s client).....................................................................................4
Description of TDABC and Features..............................................................................................5
TDABC........................................................................................................................................5
Features of TDABC.....................................................................................................................6
Differences between TDABC and Activity-Based Costing and traditional costing........................6
Appropriateness of TDABC............................................................................................................7
References......................................................................................................................................11

THE SUITABILITY OF THE TDABC FOR A COMPANY
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Introduction
The report explains the use of Time Driven Activity-Based Costing in the Company that
deals with service delivery to its customers. (TDABC) is the cost accounting device used by the
management in financial planning for the measurements required to handle the production and
sales evaluation in their calculated plans. The paper specifically analyses the application of the
TDABC in the company. The first section of the report provides a brief description of the
chosen company (Sanic Limited Company). The second section deals with the features and
description of TDABC. The third part of the paper explained in detail differences between
Activity-Based Costing from TDABC and traditional costing method. The fourth section will
provide information on whether the model (TDABC) is most appropriate for the company. Then
the last part is the general conclusion.
Description of the company (firm’s client)
Sanic Hotel was founded in the early 1990 by the Community youth group. The Hotel
mainly provides accommodation services to a large number of the customers, especially the
tourists. This business trend has resulted into a series of competition among various companies
that offer accommodation services. The Management uses the information derived from the
simple tradition costing method to calculate both the indirect and indirect cost. Sanic Hotel
experiences the problem of strong competition due to hotel developments which causes a
positive movement every year especially in the city. Due to growing competition, Sanic hotel
began to offer various services to its customers. The hotel also consider the calculation of correct
cost( Direct and Indirect cost) in order to prevent the occurrence of underpricing or overpricing
which may affect the hotel profitability. Sanic hotel decided to apply modern cost allocation