Question

1. What is time-driven activity based management (TDABC)?  

2. How does it differ from activity based costing (ABC) and why would TDABC be used in place of ABC?

3. According to a Wall Street Journal article, a three hour televised football game boils down to 10 minutes and 43 seconds of actual playing time. What other activities take place during a televised football game? Of all the activities, which are value-added and which are non-value added?

Football fans everywhere are preparing to settle in for the NFL _2_.docx

Answer 1

1. In time-driven activity-based costing (TDABC) resource costs are directly assigned to the cost objects using the cost per time unit of supplying the resource, rather than first assigning the costs to the activities & then from activities to cost objects. It is beneficial in the following ways

1. It provides direct way to measure the unused capacity.

2. It can be used to include complexities in activity.

3.It requires upfront investment to measure activity times & continuously maintain them

4. It uses time to drive costs directly from resources to cost objects.

2. the traditional ABC system uses transaction cost drivers for example number of invoices processed , while the time-driven ABC system uses duration cost drivers for example minutes or hours. This is the major difference between the two systems.Many companies have replaced their volume-based costing systems with activity-based costing systems for more accurate product costing & better decision making. For firms with multiple products or process, the overhead rates calculated under volume based costing often generate inaccurate product costs.ABC system recognize that products & services consume indirect costs in a manner that follows the usage of activities rather than the volume of output. Therefore it improves on Costing Accuracy.

3. Advertisments, Time Outs, Injuries, Narration, Play Reviews are all other processes that occur during a foot aside from the actual game being played. According to me I believe the advertisments would be the only value added activities because of my position as a customer; the rest would be non-value added activities. In my viewpoint as a customer the football game has a low cycle efficiency because of the high amount of non-value added activities.