Time Driven Activity Based Costing (TDABC) Analysis for Boral Limited

This report examines the effectiveness of Time Driven Activity Based Costing (TDABC) from the perspective of a managerial consultant, with a focus on its application to Boral Limited, a major Australian manufacturing firm. The report begins with an overview of Boral Limited and introduces TDABC, highlighting its features, which simplify costing by eliminating the need for extensive employee surveys. It compares TDABC with traditional and Activity-Based Costing methods, emphasizing the benefits of TDABC for Boral Limited. The analysis reveals how TDABC can improve budgeting and cost management by providing a more accurate allocation of indirect and support costs, thereby enhancing resource efficiency and competitiveness. The report concludes that TDABC is highly appropriate for Boral Limited, offering improved visibility into capacity utilization and enabling better estimation of future resource demands, ultimately supporting informed managerial decision-making.

Running head: MANAGERIAL ACCOUNTING
MANAGERIAL ACCOUNTING
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The main purpose of this report is to analysis the effectiveness of Time Driven Activity
Based Costing(TDABC) in a business from the view point of a graduate who is employed in a
managerial consultancy firm. It has been assumed that a major client of the consultancy firm is
Boral Limited, which is one of the leading manufacturing firms in Australia. It has been found
that TDABC is a modern budgeting system that enables in simplifying the costing process by
eliminating the need for interviewing and surveying workers for apportioning resource costs to
the activities before driving them down to cost objects. The report will be containing an detailed
explanation as to what are features of TDABC and how could the same help the selected
company in preparation of a better budget.

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Table of Contents
Introduction......................................................................................................................................3
Overview of Bowral Limited...........................................................................................................3
Time Driven Activity Based Costing(TDABC) and Its Characteristics..........................................4
Differences among TDABC, ABC and Traditional Costing Methods............................................5
Benefits of Implementing TDABC in Bowral Ltd..........................................................................8
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

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Introduction
The main purpose of this report is the assessment of the effectiveness of Time Driven Activity
Based Costing method which can be applied in an organization from a view point of agraduate
who is entering a managerial firm. The report assumes that the main client of such managerial
firm is Bowral Limited, a leading manufacturing brand of Australia. The first part of the report
will be providing a brief overview of the client company Bowral Limited and then the report will
be introducing the concept of Time Driven Activity Based Costing (TDABC) (Öker & Özyapici,
2013). Then the discussion will be moving to the salient features of Time Driven Activity Based
Costing (TDABC). The next part will focus on the differences and similarities which exists
between TDABC, activity Based Costing and Traditional Costing Method. The report will finally
be concluding with the assessment whether TDABC is appropriate for the client company which
is Bowral Limited.
Overview of Bowral Limited
Boral Limited is a multinational firm, which is engaged in supplying raw material and in
construction business of building materials. It has its headquarters in Australia however, it also
operates in USA and Asia. In 2017, the sales of the organization has been 4.39 billion AUD and
the employee base of the organisation has been 16,000 working across 700 operating sites
approximately (Boral.com.au, 2018). There are three operating divisions in Boral, which include
Boral Australia, USG Boral and Boral North America. The company has a lot of individuals
employed in these three operational divisions of the company.
For this particular report, Boral Australia has been selected, in which the management is
planning to implement TDABC within the organisation. The main products of the organisation
include concrete, quarry, asphalt. Cement, concrete placing, bricks, roofing, masonry, softwood

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and hardwood timber. This division of the organisation is a main supplier of materials and
products to the commercial and residential construction along with roads and engineering
markets.
Time Driven Activity Based Costing(TDABC) and Its Characteristics
The method of Activity Based Costing Method has a lot of flaws in the process. In order to
overcome the flaws of general activity based costing, TDABC method was developed which is
proven to be simpler, cheap and highly convenient in comparison to general Activity Based
Costing method. In details, TDABC method saves time by eliminating the interviewing process
and surveying of employees for apportionment of resource cost to various activities thereby
ensuring that the complexity of the overall costing process is removed (Tanis & Özyapici, 2012).
The costs objects of the company can be in the form of orders, customers and products. TDABC
method is efficient in apportioning the costs to various resources. The following process is
conducted with the help of well designed framework requiring two groups of estimates and the
method also ensures that the costing process is free from all complexities. The key features of
TDABC method are discussed below:
1. TDABC is associated with calculating the cost relating to supply of resource capacity.
For example, an area of Bowral limited of Australia which is engaged in handling
customer orders can use the method of TDABC. TDABC method calculates the cost
which are associated with supervision, equipment, technology supplied and resource
personnel. The method segregates the total cost of the company on the basis of time
available for the workers and the method calculates cost capacity rate (Öker & Adıgüzel,
2016).

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2. TDABC system is related with utilizing capacity cost rate to drive the costs of resources
of the department to cost objects by formulating the resource capacity demand which is
essential for all cost objects. TDABC requires a projection of time on the basis of which
an estimate can be made for the order of the customers. However the requirement of
matching every customer order is not necessary under TDABC method. Instead, the
method allows the time estimated to vary depends on specific demands which are
required. These orders could be manual or automated orders, expedited orders, global
orders, orders for fragile products and orders of the new customers not having any
existing credit record. for particular orders. Hence, this system simulates the actual
procedures utilised in carrying out work across the organisation. The method removes the
complexities and variations which are present in conventional ABC system without
creating exploding demand in relation to data estimates and storage or processing
capacities. Therefore, through TDABC implementation and maintenance Bowral Limited
can avoid the complexities which are involved in the traditional ABC costing method or
any other method of costing, thereby making the entire costing structure effective and
efficient.
Differences among TDABC, ABC and Traditional Costing Methods
The TDABC method and ABC method were both developed in 1980 and the person who
is credited with the findings of these two methods is Robert Kaplan. Before the introduction of
the above mentioned two costing methods, the companies applied traditional method of costing
which was not that much efficient in allocating and identifying costs on the basis of cost objects
of the company (Elhamma & Zhang, 2013). Thus a new method was required which could deal
with the deficiencies of the traditional costing method. With the introduction of the new

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methods, the company can now measure the costs which are associated with each and every
activity of the business. Both the methods ABC costing and TDABC costing have proven
effective in calculating the cost of the business and also the overall profitability of the business.
This would enable in benefitting the firms by collecting reliable and rightful information through
realisation of the cost drivers. Some of the cost drivers constitute of the following:
1. Quantity Drivers which are on the basis of quantity, however such driver are not that
much accurate.
2. Duration Drivers which measures durations which is mildly accurate.
3. Intensity Drivers which has greater accuracy and also increased expenses.
Traditional Costing Method
Traditional Costing methods involves allocation of overhead costs on the basis of volume
of production resources which is consumed. Under this method the overhead cost is either
allocate don the basis of direct labour hours or on the basis of machine hours used. The problem
which is associated with this method is that the overhead cost may be much more than the
allocations therefore a minor change in the volume of overhead can influence the whole of
overhead applied. Since this factor is involved in the traditional method, direct relationship
between the overhead cost and volume of production is direct (Meyer et al., 2013). The
traditional accounting system does not apportion non-manufacturing expenses, which are
associated with the production of an item such as administrative expenses. The firms use this
costing system mainly in external financial reports, since value is provided for the overall cost of
goods sold.

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Nowadays traditional costing system has become obsolete in the system of costing, as
most of the work processes uses machines and computers. The introduction of more machinery
and computers in the manufacturing process has outdated the traditional costing system as the
method uses direct labour cost for allocation purposes. In addition to this if the management of a
company uses Traditional costing method then it could lead to ineffective management
decisions.
Activity Based Costing Method
Activity Based Costing tackles the deficiencies of traditional costing method and also
ensures that the proper cost distributions is done by the management. The bases of
apportionment which the system uses are different from the bases used in the Traditional system
of costing. In addition, ABC system considers each activity associated with the production of an
item along with distribution of activity cost. The cost allocated to each activity is allocated
further to the products necessary for the overall production activity of the business (Phillips &
Phillips, 2016).
The main advantage of using Activity Based Costing Method is in the fact that the
company which applies ABC costing method is able to achieve greater costing accuracy. The
companies allocate cost to the products only which is necessary for the production activity of the
business. This system eliminates the allocation of product costs, which are not relevant (Schulze,
Seuring & Ewering, 2012). The other benefits of the ABC system which takes the interpretation
of cost for internal management and greater understanding of the costs associated with overhead
in consideration. The introduction of Activity Based Costing in a business requires lot of
extensive resources (Rbaba’h, 2013). However, this could be a drawback for the firms having
lower amount of funds. Finally, there might be few users, who could misinterpret information by

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using this particular system. However this situation is very much rare in nature (Emblemsvåg &
Bras, 2012).
Time Driven Activity Based Costing Methods (TDABC)
TDABC methods looks into the few problems which are associated with the Activity
Based Costing Method. This is an important development and is considered better than
traditional as well as ABC method of cost allocations. The benefits which are associated with
using the TDABC method are given below:
1. TDABC system of Costing can work in collaborations with other systems such as
enterprise resources planning and customer relationship management (Nguyen & Aiello,
2013).
2. The main advantage of using this method is the fastness of the method for processing
higher amount of transaction.
3. This system provides notification to the workers about the unused resources and allow
the management to act accordingly.
4. Lastly the method can be started without appropriate ERP system implementation, which
can be used to analyze the costs of the company.
Benefits of Implementing TDABC in Bowral Ltd
As per the assessment of TDABC system and in comparison with the other two models, it
could be found that TDABC model is highly appropriate for Boral Australia. The reason is that
the system provides higher visibility to capacity efficiencies and usage along with the capability
to estimate future resource demand. Boral ltd has a large number of rivals in Australia with
Adelaide Brighton Cement and also has a large number of competitors in foreign countries as

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well, it needs to cut down its cost of production. TDABC system will enable Bowral ltd in
gaining a level of competitive advantage by allocating indirect or support cost in a way that the
resulting information of cost reflects a rightful overview of resource consumption and resource
needs on the part of customers and services of the firm. Bowral can manage the resources
effectively and also gain competitive advantage by following activity based costing (Van Der
Aalst, 2013).
In addition, it is important to take into considerations the TDABC method has provided
on online services compared to those provided through traditional channels affecting
management decisions. TDABC method has a wide impact on the online services of the
company and thus will enable the management of Bowral to extend the market of the company.
For online services, the management of Boral would have cost-related data likely including
higher indirect costs from being a traditional provider with higher amount of labour (Andersson
& Titov, 2014). Thus from the above discussions it is clear that the company Bowral Limited
will benefit with the introduction and implementation of the TDABC method.
Conclusion
Thus from the above analysis it is clear that with the implementation of the TDABC method the
business of Bowral ltd will benefit extensively. In addition, TDABC system could work in
collaborations with the system of customer relationship management and enterprise resource
planning. Finally, it has been evaluated that TDABC model can be highly efficient and effective
if the method is properly implemented and maintained for Boral Australia.

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Reference
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Nguyen, T. A., & Aiello, M. (2013). Energy intelligent buildings based on user activity: A
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