Time‐Driven Activity‐Based Costing: An Implementation in a Manufacturing Company

Öker, Figen; Adıgüzel, Hümeyra

doi:10.1002/jcaf.22144

Cited by 23 publications

(23 citation statements)

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“…In Equation (1), n ∑ i=1 (t oi +t ci )k o BA i represents the total rework mix processing costs, and the associated constraints are shown in Equation (17). t oi is the time of rework mix processing and t ci is the time to shift each batch of product i to the rework mix department [57][58][59]. After mixing, the rubber charge is dropped into a chute and fed by an extruding screw into a roller die.…”

Section: Total Rework Costmentioning

confidence: 99%

A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry

Tsai

2018

Energies

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Issues related to global environmental protection are highly important. Under the global trend of energy saving and carbon reduction, in order to lower the carbon emissions of products or services offered by enterprises, the Taiwanese government aims to control carbon emissions by constructing a carbon tax system and mandating enterprises to pay a carbon tax. The collection of a carbon tax can minimize the total social environmental cost and increase the efficiency of carbon reduction; the need to control the green quality cost can serve as a criterion of green management decision-making. This study aimed to reorganize carbon emissions in different stages of production in order to lower the total carbon emissions of products. Activity-based costing (ABC) was adopted to assess green quality management and production cost. The optimal green quality production portfolio was selected via a mathematical programming model to focus on the expansion of productivity and outsourcing strategy in order to effectively lessen the harmful effects on the environment and maximize profits. Besides academic contributions, the findings of this study could serve as a reference to enterprises on assessing the effects of carbon emissions, carbon taxes, and environmental management on production decision-making.Green Quality Management mainly aims at eco-efficiency in the complete product life cycle, including design, raw material selection, process improvement, prevention and treatment of pollution, after-sales services and waste recycling, and processing. Quality cost measurement is the first step of quality cost management. Several researchers have proposed various methods to measure the cost of quality (COQ), which includes prevention, appraisal, internal failure, and external failure costs [4]. The Activity-Based Costing (ABC) approach has been widely used in measuring COQ [5-9] because many COQ elements are activity-related costs [9]. ABC uses a two-stage cost assignment to compute the costs of activities in the first stage and the costs of the objects in the second stage [10]. Thus, activity costs can be achieved in the first stage and sources of activity costs can be traced in the second stage of ABC cost assignment. ABC divides activities into value-added (VA) and non-value-added (NVA) activities. The purpose of green quality management is to reduce the workload of VA activities and to finally eliminate the execution of NVA activities related to COQ.The theory of constraints (TOC), proposed by Goldratt in the book titled "The Goal" [11], aims to identify the constraints and managing them. There are several constraints in business operations, and TOC uses five steps to identify and eliminate the bottlenecks one by one to increase business performance. One method is capacity expansion with a fixed capital investment to increase the possible sales and profits.Carbon taxes aim to reduce carbon emissions, and they offer a potentially cost-effective means of reducing greenhouse gas emissions [12]. Carbon taxes are also an important p...

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Section: Total Rework Costmentioning

confidence: 99%

A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry

Tsai

2018

Energies

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“…To the best of our knowledge, only the study by Öker and Adigüzel (2010) deals with the production process of a manufacturing company. The authors concluded that the two types of resources (human labour work and machine work) used in such companies make it necessary to calculate two different practical capacities, thus entailing additional work.…”

Section: Research Focus: Is Tdabc Right For All Companies?mentioning

confidence: 99%

“…In fact, the studies on TDABC in service companies show that for this type of company, it is only necessary to resort to human labour resources to express the 8 practical capacities of companies (e.g., Demeere et al, 2009;Dalci et al, 2010;Giannetti et al, 2011;Somapa et al, 2012;Everaert et al, 2012;Kaplan et al, 2014;Basuki and Riediansyaf, 2014;Campanale et al, 2014). As a result, Öker and Adigüzel (2010) believe TDABC is a more appropriate costing system for service companies than for manufacturing. Furthermore, Souza et al (2010) concluded that the unstable and unpredictable production environment in make-to-order companies complicates the definition of time equations, and TDABC is therefore unsuitable.…”

Section: Research Focus: Is Tdabc Right For All Companies?mentioning

confidence: 99%

“…Could this be a trivial gap in the literature or is there another reason? In fact, to the best of our knowledge, only the study by Öker and Adigüzel (2010) illustrates a model in a manufacturing company and ends by concluding that TDABC is more suitable for service companies. This is because, as the authors say, in service companies, resources can be assigned through labour hours.…”

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Time-driven activity-based costing

Barros

Ferreira

2017

QRAM

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Purpose By designing a pilot time-driven activity-based costing (TDABC) model, this study aims to examine in depth the suitability and the complexity of TDABC in a manufacturing company. Design/methodology/approach To obtain a deeper understanding on the matters to analyse, this research adopts an interventionist approach. The host organisation is GP, a Portuguese company in the frozen food sector. Findings The authors’ experience allows them to assert that TDABC is suitable for a manufacturing company and it is able to deal with the variability of the industrial processes. Nonetheless, through a comparison with the models presented in the literature, TDABC appears to be more complex for manufacturing. The authors argue that this happens for two reasons. First, the two types of resources (human labour and machinery) used in production areas create a need to split tasks and to create two equations for each process, something that does not happen in service companies. Second, times are difficult to individualise for certain highly automated procedures, which could also give rise to some errors. Research limitations/implications The designed model is compared to other models presented in the literature. Practical implications This study shows a real example of TDABC in manufacturing and the procedural innovation of the time equations. Originality/value As the TDABC literature has been mostly focused on examples of service companies, the authors examine the technical suitability and the complexity of TDABC in manufacturing companies.

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“…While a multitude of applications for existing costing concepts have been continuously broadened (e.g., time-driven activity-based costing [4], [5], [6], [7]), at the same time, their degree of specialization has increased (e.g., dedicated methodologies for woodworking [8] or welding [9]). As a result of such methodological diversity, recent research even addresses the selection of appropriate concepts within specific contexts [10].…”

Section: Introductionmentioning

confidence: 99%

Knocking on Industry’s Door: Needs in Product-Cost Optimization in the Early Product Life Cycle Stages

Walter

Leyh

Strahringer

2018

J. Complex Syst. Inform. Model. Q.

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Abstract. While theoretical concepts for product-costing methodologies have evolved over the decades, little emphasis has been placed on their integration into modern information systems. During a co-innovation workshop at SAP SE, we initiated our collaborative research with selected large-scale enterprises from the discrete manufacturing industry. Moreover, we conducted interviews with business experts to gain a sophisticated understanding of the cost-optimization process itself. As a result, we present an exemplary optimization process with an emphasis on the specific characteristics of the product development stage. Based upon this example, we identified associated deficits in information system support. No current software fulfills the enterprises' requirements regarding cost optimization in the early stages of a product's life cycle. Thus, the respective processes lack integration in corporate environments. Taking this on, our article compiles detailed problem identification and, moreover, suggests approaches to overcome these hurdles.

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Time‐Driven Activity‐Based Costing: An Implementation in a Manufacturing Company

Abstract: This article demonstrates the implementation of time‐driven activity‐based costing (TDABC) in a manufacturing company, showing how it can provide far more relevant information about product profitability and capacity utilization than standard costing. © 2016 Wiley Periodicals, Inc.

Cited by 23 publications

References 1 publication

A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry

A Green Quality Management Decision Model with Carbon Tax and Capacity Expansion under Activity-Based Costing (ABC)—A Case Study in the Tire Manufacturing Industry

Time-driven activity-based costing

Knocking on Industry’s Door: Needs in Product-Cost Optimization in the Early Product Life Cycle Stages

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