Time-Driven Activity-Based Costing

APPENDIX A

TRANSFORMING UNPROFITABLE CUSTOMERS

Acting on the profitability information from a Time-Driven ABC model is the same as from a conventional ABC model. Both models give managers a better picture about process costs and the cost and profitability of individual products and customers. As we argue in this book, however, the TDABC approach generates more accurate data at lower cost. In this appendix, we review the types of actions managers take on the basis of the output from their ABC models. Specifically, we focus on how to improve customer profitability, a common application for TDABC.

We find that the single best picture from an ABC model is the “whale curve” of cumulative customer (or product) profitability (figure A-1). The whale ...