It also helps in identifying the processes that are over pricing the product and, the replacement or improvement of which could lead to a better yield. Time Driven ABC was proposed by Robert S. Kaplan and Steven R. Anderson, in 2004. Although ABC had been a trend setter in guiding companies and organizations, still it was unable to keep pace with the ever expanding production lines of companies. Time driven ABC is actually a simplification of the ABC methodology (Kaplan & Bruns).
Time Driven ABC requires only the estimation of the practical capacity of resources and the time required for transactional activities.
Where ABC does not account for the unused capacity in the organization, Time Driven ABC accounts for the unused capacities, thus opening avenues for the allocation of these capacities to new products or cutting them down. It is easier to maintain and gather the data through this model, as the work force required is far less and also the gathering of the data does not require the employees to be surveyed. The manager can allocate the time for an activity based n his professional observation rather than subjective accounts of the employees.
It is easier to calculate and validate as compared to the traditional ABC. The data can also be easily updated. The Time driven ABC method allows for the incorporation of a wide variety of elements in the time equation. It is able to cope with more than just a local department with limited number of activities. It also reduces chances of budget slack, created by withholding of private information held by managers.
The Essay on Time Driven ABC
Time Driven ABC costing is more superior to the traditional method in many different ways. Overall there are many negatives to the traditional system including its higher cost, low accuracy and is an extremely complicated system. The time driven ABC costing has many benefits including its lower cost, ease of implementation, higher accuracy and the larger scope of its models. Traditional ABC ...
