Time-Driven Activity-Based Costing in the Assembly Industry

Abstract

Costs and their determination play a critical role in all manufacturing companies. The traditional costing system has received criticism resulting from the arbitrary allocation of indirect manufacturing costs. As an important initiative to address its weaknesses, new costing methods such as the Time-Driven Activity-Based Costing (TDABC) have emerged. Unfortunately, up to our knowledge, no investigations have been applied in analyzing assembly companies thoroughly nor considering all the processes necessary to obtain the final products. This article explores the TDABC application in the assembly industry through comparison with traditional volume-based costing by focusing on manual and semi-automatized production. Since the research is descriptive, a multiple-case study design was implemented in the assembly of televisions, motorcycles, and printed circuit boards. The developed methodology allowed determining the existence of factory overhead and direct labor cost variances between two different cost accounting systems, which also affected the unit cost of the products. Findings also highlight the benefits of TDABC application in the assembly industry, along with the shortcomings and future potential of research in this area.

Integrating corporate social responsibility and quality management into the TDABC costing system: a case study in the assembly industry

“…The comparative study focused on the assembler’s operational processes (TV assembly and Warehouse). The reasoning behind this is that TDABC has certain limitations in analyzing the strategic and support processes due to their low standardization and irregularity (Vedernikova et al , 2020). The TDABC application requires various inputs, such as processes and activities data, times per activity, resources and annual or monthly frequencies per activity.…”

“…The rest of the CSR dimensions belong to strategic operations. Therefore, the analysis of assembly processes, enterprise data and findings from Vedernikova et al (2020) was used. Subsequently, this previous study was integrated with current CSR and QM activities.…”

“…The TDABC calculation is based on the generic steps developed by Everaert et al (2008) and Reynolds et al (2018), as well as the methodology proposed by Vedernikova et al (2020). The steps for estimating QM, OSHA and EM process costs are the identification of various resource groups, estimation of the total costs of each process (supplied resources), estimation of the practical capacity of each process, calculation of the unit cost of each process, determination of the time used in each process and sub-process and value of each process, sub-process and activity (used resources).…”

“…The authors affirm that TDABC is a powerful tool to analyze the actual condition of production. Vedernikova et al (2020) highlighted that the TDABC benefits extend beyond the unit cost determination, allowing to understand the business dynamics in a more in-depth and more detailed manner through consideration of sub-processes and activities.…”

The application of modern methods OF calculation in foundry production

“…For example, depreciation of assets based on the company's decision was not assigned directly to the primary activities, but not until this stage, through support activities. The costs of support activities were allocated according to the time consumption (relative quantity of the minute) on the principle of the Time-Driven Activity Based Costing method [8]. The activity cost matrix captures the allocation of primary activity costs (CPA) broken down into variable costs (VC) and labour costs (LC), and for individual activities, support activity costs (CSA), see Table 2.…”