Question

You are recently employed as a graduate consultant in a management consultancy firm. One of your firm’s clients is currently evaluating its
budgeting system. The CEO of your client had recently attended a seminar on Time-Driven Activity-Based Costing (TDABC) in private organizations and would like to know whether the TDABC is suitable for the company. Your manager has asked you to prepare a report for the client.

Questions:

1) A description of your firm’s client and what functions or activity are there in business?

2) A description of the TDABC and its features 4-5 features

3) In what ways TDABC is different from Activity-Based Costing 3-4 difference.

4) Difference between traditional costing systems and TDABC 3-4 difference

Answer 1

1) A description of your firm’s client and what functions or activity are there in business?

Answer:

As per the information provided in the question, there is no details of firm with respect to activates undertaken by it. However, it is mentioned that it is evaluating its budgeting system and its CEO attended a seminar on Time-Driven Activity-Based Costing (TDABC) in private organizations. It means that company is practicing a budgeting system and is in private organisation. Management is keen to adopt newer and effective budgeting system. But it is difficult to specify functions or activity of the firm in absence of complete details.

2) A description of the TDABC and its features 4-5 features

Answer:

Earlier Activity Based Costing (ABC) method was popular and was used by Businesses to evaluate process/products. However, it has certain limitations and need arose for new costing system. Time-Driven ABC is the answer which more efficient and less time consuming. Main features of TDABC is as follows

1.    TDABC is efficient costing method and uses less time to adopt.

2.    TDABC is easier to adopt for different activities on same pattern compared to other traditional costing systems.

3.    It is scalable and can be applied to very huge costing requirements.

4.    This system can be developed and deployed faster and requires very less information.

3) In what ways TDABC is different from Activity-Based Costing 3-4 difference.

Answer:

1.    ABC requires more time to interview / survey concerned individuals to assess activities but same is not required TDABC. On this basis costs are apportioned under ABC.

2.    ABC method is typically made / customised for specific department or activity and it is difficult to use it for any other activity. However, in the case of TDABC, it is easier to adopt the same model under TDABC.

3.    TDABC is the improvement in ABC Method. However, TDABC may not be applicable / applied under all activities. ABC remains good for specific purposes.

4) Difference between traditional costing systems and TDABC 3-4 difference

Answer:

1. Traditional Costing system is normally applied for specific activities depending upon the requirements. But TDABC can be easily modified and applied to many activities.
2. Trading costing is developed based on surveys of employees and specific details of activities for which it is developed whereas in TDABC most of information is collected in general or available handy.
3. Traditional costing systems work well in the limited setting for it was developed. But TDABC can is easier to adopt for new activities.