CHAPTER ONE
THE EVOLUTION OF TIME-DRIVEN ACTIVITY-BASED COSTING
Introduction
CONSIDER THE CONVENTIONAL activity-based cost (ABC) system used at a large financial services firm several years ago. The system attempted to measure product cost and customer profitability each month, certainly desirable goals for stimulating process improvement, product pricing, and customer relationship actions. But the process required seven hundred employees at more than 100 facilities to submit monthly surveys of their time. The company employed 14 full-time people just to collect and process the data and prepare management reports, which took more than thirty days to prepare.
Hendee Enterprises, a far smaller Houston-based manufacturer of awnings, encountered ...
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