Question

Describe 1. What is time-driven activity based management (TDABC)? How does it differ from activity based costing (ABC) and why would TDABC be used in place of ABC?

2. According to a Wall Street Journal article (attached, please see below) , 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?

Answer 1

1. Time-driven activity based management (TDABC) is an improved version of activity based costing (ABC). It provides a clear understanding to all business entities including small or large entities about cost of production and work done. This type of system establishes a relationship between cost measurement and time. We can say that it calculates cost of per unit of time and then helps in estimating utilization rate. This is done by getting data using a time sheet which is filled by employees. Time-driven activity-based costing allows you to look at your profit and losses by client, job, product or service, department or team, which can help you streamline your entire business for optimal profitability and management.For example, a unit of time could be as small as one minute of performing a credit check on a client. Activity based costing (ABC) includes identification of different activities in an organisation and then assigning cost to each activity.

2. During a match, there are different activities that takes place like advertisements, drink breaks, etc. The answer to this question could vary depending upon the perspective. From target based perspective, customers are target group for most advertisements, so this could be one of the major value added activities.