Time-Driven Activity-Based Costing

CHAPTER FOUR

IMPLEMENTING TIME-DRIVEN ABC MODELS

Launching a Project

NOW THAT WE HAVE LEARNED how to build time equations and to estimate capacity cost rates, we consider how to organize a project to implement a Time-Driven ABC model. Figure 4-1 shows the typical sequence of steps to implement an enterprisewide TDABC model.

PHASE I: PREPARATION

At the launch of the project, an executive sponsor and steering committee should specify the model’s objectives. TDABC models can be used for diverse purposes, such as to focus process improvement activities, provide an analytic basis for charging out the costs of information technology (IT) and other support departments, facilitate a product and SKU rationalization process, and, most typically, enhance ...