Managerial Accounting: Evaluating TDABC System for a Consulting Firm

This report provides an evaluation of the Time-Driven Activity-Based Costing (TDABC) system from the perspective of a graduate consultant working in a management consultancy firm. The analysis focuses on the suitability of TDABC for Boral Limited, a major manufacturing firm. The report begins with an introduction to TDABC, its concepts, and features, followed by a description of Boral Limited's operations. It then compares TDABC with traditional and activity-based costing systems, highlighting the advantages of TDABC, such as its simplicity and ability to integrate with customer relationship management and enterprise resource planning. The study concludes that TDABC is the most appropriate costing method for Boral Limited, offering insights into the efficiency of capacities, future resource demand estimation, and cost reduction opportunities. The report also emphasizes the system's ability to eliminate irrelevant costs and facilitate online service management, making it a valuable tool for Boral Limited to enhance its competitive position and revenue generation.

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student:
Name of the University:
Author Note

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Executive Summary
The Time-Driven Activity Based Costing System (TDABC) is a modern budgeting
system that aims to simplify the entire process of costing. This particular study aims to focus on
evaluating the suitability of the Time-Driven Activity Based Costing System from the
perspective of a graduate consultant, who has been employed in a management consultancy firm.
The particular assumption that has been undertaken is one of the major clients of the firm has
been Boral Limited. Boral Limited is one of the top manufacturing firms of the nation.
The particular observation in case of the evaluation has been that the TDABC simplifies
the costing process by removal of the essential processes like surveying and interviewing the
employees for carrying out the apportioning of the costs in regards to the resources that are
associated with the particular activities. It also has been found out that this new system of costing
also suitable to work alongside with customer relationship management and enterprise resource
planning.

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Table of Contents
Introduction......................................................................................................................................3
Description of Boral Limited...........................................................................................................3
Time-Driven Activity Based Costing (TDABC) – its concepts and features..................................3
Differences between TDABC, activity based costing and traditional costing systems...................5
Traditional Costing System.........................................................................................................5
Activity Based Costing................................................................................................................5
Time-Driven-Activity-Based Costing (TDABC) system:...........................................................6
Appropriateness of TDABC to Boral Limited.................................................................................6
Conclusion.......................................................................................................................................7
References and Bibliography...........................................................................................................8

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Introduction
The Time-Driven Activity Based Costing System (TDABC) is a modern budgeting
system that aims to simplify the entire process of costing. This particular study aims to focus on
evaluating the suitability of the Time-Driven Activity Based Costing System from the
perspective of a graduate consultant, who has been employed in a management consultancy firm.
The particular assumption that has been undertaken is one of the major clients of the firm has
been Boral Limited. Boral Limited is one of the top manufacturing firms of the nation (French
2016).
The suitability of the Time-Driven Activity Based Costing System (TDABC) has been
assessed in terms with the Boral Limited. The inner business operations of Boral Limited have
been aimed to have an overview into. Next, the concepts and features of TDABC have also been
discussed. The final step involves the ascertainment of the fact whether the TDABC is suitable
for Boral Limited or not (Öker and Adıgüzel 2016).
Description of Boral Limited
The name Boral Limited is much well-known as it is a multinational company. The
company deals in the manufacture and supply of iron and other construction materials. The
conglomerate is based out of Australia and has extended its business operations in USA as well
as in Asia. In 2017, the total sales revenue of the organization has been amounted up to 4.39
billion AUD. The total employee count of the organization has been 16,000. The operating sites
of the company have been 700, approximately. The names of the segregated divisions of the
organization have been Boral Australia, Boral North America and USG Boral.
The management of Boral Limited has chosen to implement TDABC in the organization.
The organization manufactures a number of products like asphalt, quarry and concrete, bricks,
masonry, softwood and hardwood.
Time-Driven Activity Based Costing (TDABC) – its concepts and features
The Time-Driven Activity-Based Costing has been found out to be laden with a number
of issues. For the purpose of overcoming these issues, the TDABC system of costing has been

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developed. In comparison to the activity based costing this particular system of costing has been
found out to be simpler and cheaper.
The model of TDABC is useful in apportioning the costs of resources to the cost objects.
This has been particularly carried out with the help of an improved framework that essentially
requires two groups of estimates (Parekh 2016).
The fundamental features of TDABC can be listed down as follows:
 The particular costs that are associated with the resource costs are accurately computed
by the TDABC. To understand this more clearly, a department of Boral Australia has
been taken into consideration. The department primarily deals in the orders that are
placed by the customers. Now, the system of the TDABC accurately determines the costs
of the resources like the occupancy, supervision, resource personnel and equipment that
is acquired for the process of production. The costing system also incorporates the
segregation of the total cost by the time that is available to the workers in the department
for arriving at the rate of cost capacity (McLaughlin 2014).
 TDABC system has been associated with the utilization of the capacity cost rate to link
the resource costs with the particular cost objects. This is essentially executed with the
projection of the demand in regards to the resource capacity. The considered department
of the organization in implementing the TDABC has to determine the time that will be
taken to process the order of the customer. However, it has to be noted here that it is not
at all mandatory for the system to match the order of the customers. The system permits
the estimated time to vary in accordance to the different demands by the different
customers. The order may be in the nature of manual or automated orders like the
expedited orders, global orders, orders related to fragile products and new customer
orders. Therefore, the simulation of the essential procedures is executed by the system
which results in the smooth flowing of work across the organization. The TDABC system
can also capacitate the high-level complications and variations in relation to the
estimation of the data and processing or storage capacities (Akhavan, Ward and Bozic
2016).

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Differences between TDABC, activity based costing and traditional costing systems
Robert Kaplan had developed the TDABC and ABC systems of costing in the year of
1890. It had been ascertained that the conventional system of costing is not effective enough to
distribute the costs among the different heads and has effectively failed to identify the profitable
customers. Such a drawback gave rise to the models of TDABC and ABC costing. It should be
noted here that both TDC and ABC costing leads to the accurate calculation of the whole
profitability of the customer. This would further benefit the firms by the gathering of the
potentially correct information through the realization of the cost drivers (Thaker, Frank and
Feeley 2015).
Traditional Costing System
Numerous organizations make use of the traditional costing system in the recent times.
This involves the allocation of the manufacturing overheads in accordance to the units produced.
The traditional costing system essentially believes that the volume metric is the major cost driver
that is associated with the manufacturing overhead. This particular system involves the cost
accountants allocating the manufacturing costs in regards to, only the products. The traditional
method of costing does not take into consideration the non-manufacturing expenses that are
related to the process of production of like the administrative expenses.
The traditional costing system will soon become obsolete and as the organization using
them have resorted to computers and machines for ensuring optimum production. This is because
the computers and machines that are being used are technologically improved to be used with the
current system. This may lead to inaccurate results as the cost driver that has been selected is not
at all appropriate. The traditional costing system does not take into account the different drivers
of cost that has been used in that might be included in the total cost of a particular product
(Hoozée and Hansen 2014).
Activity Based Costing
The Activity based costing is a reliable costing system that gives a proper overview into
the product’ cost. The particular bases that have been used for allocating the costs in this
particular system is different than the bases that are used in the traditional costing system. The
activity based costing essentially involves the identification of the different activities that are
involved in the process of production of a particular product and associates these processes with

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different activity costs. The costs that have been allocated to the activities are next allocated to
the products that are required for the overall production. The major benefit provided by the
activity based costing is that it does take into account the product costs that are not relevant.
However, ABC costing is an expensive and time-consuming system of costing (Siguenza-
Guzman 2014).
Time-Driven-Activity-Based Costing (TDABC) system:
The TDABC system of costing has been a further developed version of ABC costing.
This is because this particular system of costing provides certain benefits that are not provided
by ABC costing (Inverso 2014). These benefits are as follows:
 The TDABC system works in association with the customer relationship management
and enterprise resource planning
 The system can efficiently deal in a huge number of transactions in much less time
 The system also alerts the management of the organization about the unused resources
 This system of costing facilitates a look into the capacity in regards to the time units
Appropriateness of TDABC to Boral Limited
The conclusion that can be arrived at, after the comparative study between TDABC and
two other models of costing, is that TDABC is the most appropriate costing method for Boral
Limited. This is particularly because the TDABC costing system provides an overview into the
efficiency rate of the capacities along with the capability of the organization to estimate the
demand of the future resources. The firm has been facing extreme competition in relation to its
fellow competitors. Thus, it is advisable that it reduces its cost of production. This system of
costing also allows Boral to eliminate the costs that are irrelevant in nature.
The TDABC costing system can also be applied to the online services. In case of other
systems of costing, these benefits cannot be acquired. The administration of the organization can
particularly benefit by analyzing the data related to costs, online. These may include higher
indirect costs like website designing, research and development and other related services. But
the per unit cost will always be lower.

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The management of the organization can also benefit by using the TDABC system by
lowering the service cost that is incurred in facilitating the providence of online products like
cement and lime. The TDABC system of costing would help the organization to develop its
online services in a better way in comparison to the other systems of costing. The proper scrutiny
of the overhead costs is also facilitated by this system as it provides detailed information into the
activates that have been executed for providing the online services.
The TDABC costing system also facilitates the service of transferring relevant and
crucial information to the managers of the organization in a fast and cheaper way. The TDABC
system does not depend on the nature of business for which it is being utilized and provides
information that is cost effective. Therefore, Boral Limited should consider adopting the TDABC
costing technique for reducing the production costs and ensuring increased dominance and
revenue.
Conclusion
Thus, as it can be obtained from the discussion in the preceding paragraphs, the TDABC
system of costing is a developed and highly suitable costing system. In comparison to the ABC
and traditional costing system, the TDABC costing system has much to offer and should be
implemented by the selected organization.

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References and Bibliography
Akhavan, S., Ward, L. and Bozic, K.J., 2016. Time-driven activity-based costing more
accurately reflects costs in arthroplasty surgery. Clinical Orthopaedics and Related Research®,
474(1), pp.8-15.
French, K.E., Guzman, A.B., Rubio, A.C., Frenzel, J.C. and Feeley, T.W., 2016, September.
Value based care and bundled payments: Anesthesia care costs for outpatient oncology surgery
using time-driven activity-based costing. In Healthcare (Vol. 4, No. 3, pp. 173-180). Elsevier.
Hoozée, S. and Hansen, S., 2014. A comparison of activity-based costing and time-driven
activity-based costing. Journal of Management Accounting Research.
Inverso, G., Lappi, M.D., Flath-Sporn, S.J., Heald, R., Kim, D.C. and Meara, J.G., 2015.
Increasing value in plagiocephaly care: a time-driven activity-based costing pilot study. Annals
of plastic surgery, 74(6), pp.672-676.
Keel, G., Savage, C., Rafiq, M. and Mazzocato, P., 2017. Time-driven activity-based costing in
health care: A systematic review of the literature. Health Policy.
McLaughlin, N., Burke, M.A., Setlur, N.P., Niedzwiecki, D.R., Kaplan, A.L., Saigal, C.,
Mahajan, A., Martin, N.A. and Kaplan, R.S., 2014. Time-driven activity-based costing: a driver
for provider engagement in costing activities and redesign initiatives. Neurosurgical focus, 37(5),
p.E3.
Najjar, P.A., Strickland, M. and Kaplan, R.S., 2017. Time-driven activity-based costing for
surgical episodes. JAMA surgery, 152(1), pp.96-97.
Öker, F. and Adıgüzel, H., 2016. Time‐driven activity‐based costing: An implementation in a
manufacturing company. Journal of Corporate Accounting & Finance, 27(3), pp.39-56.
Parekh, R., 2016. How time-driven activity-based costing reports affect healthcare outcomes
(Doctoral dissertation, University of Pittsburgh).

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Siguenza-Guzman, L., Van den Abbeele, A., Vandewalle, J., Verhaaren, H. and Cattrysse, D.,
2014. Using Time-Driven Activity-Based Costing to support library management decisions: A
case study for lending and returning processes. The Library Quarterly, 84(1), pp.76-98.
Thaker, N.G., Frank, S.J. and Feeley, T.W., 2015. Comparative costs of advanced proton and
photon radiation therapies: lessons from time-driven activity-based costing in head and neck
cancer.