Time-Driven Activity-Based Costing

Many companies abandoned activity-based costing because it did not capture the complexity of their operations, took too long to implement, and was too expensive to build and maintain. Here’s a way around those problems.

In the classroom, activity-based costing looks like a great way to manage a company’s limited resources. But many managers who have tried to implement ABC in their organizations on any significant scale have abandoned the attempt in the face of rising costs and employee irritation. They should try again, because the new approach we lay out in the following pages sidesteps the difficulties traditionally associated with large-scale ABC implementation by relying on informed managerial estimates rather than on employee surveys. It also provides managers with a far more flexible cost model to capture the complexity of their operations.

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