Time Driven Activity Based Costing
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Time Driven Activity Based Costing is a variation and improvement over the traditional activity based costing method which seeks to improve on the pitfalls and the disadvantages of the traditional activity based costing. Time driven activity based costing, as the name suggests seeks to bring in the added variable of time into the way that the costing is done in the organization. Before the time driven option, organizations would simply use the traditional activity based costing to calculate the costs of the different activities being carried out in the processes like manufacturing, administrative, selling etc. to arrive the final cost for the products or services (Kaplan& Anderson, 2004). In Time driven activity based costing, the concept of the capacity of the resource is brought into the picture while working out the costs. The capacity of any resource would be limited to the maximum amount of time that the resource will be able to spend on one or more activities within a specified time window. This capacity would serve as the benchmark for the amount of the resource that can be utilised within that time period. The other factor which worked along with this capacity is the time taken to complete the transactional activity by the resource. The time taken by a resource to complete one type of activity will be used along with the capacity to build the templates and the models so that the costing could be implemented quickly and efficiently across the company and the costs can be arrived at a with time being considered in the picture as well (Kaplan& Anderson, 2004). In this time driven activity based costing, the complicated, time consuming process of surveying the employees and interviewing them to find out the cost parameters and details.