Time Driven Activity Based Costing : When theory and reality collide: A pilot study of TDABC in a financial service company

• Main Authors: Zemariam Ermias, Lourdes, Willhelmsson, Ann
• Format: Others
• Language: English
• Published: Uppsala universitet, Företagsekonomiska institutionen 2019
• Subjects: Time Driven Activity Based Costing; Cost Allocation; Traditional Cost Allocation; Service company; Business Administration; Företagsekonomi
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-416750

The value of cost allocation comes from its initial purpose; decision support. In other words, cost allocation is considered a vital part of management, as it generates valuable information concerning efficiency and profitability. By applying Time Driven Activity Based Costing (TDABC) in a financial service company, this pilot study aims to learn from the consequences of the application, and discuss the lessons learned. The application resulted in a two-step allocation using Traditional Cost Allocation in the first step and TDABC in the final step, wherethe overhead cost of four support departments were allocated down to products. To build the model, interviews were conducted with personnel and internal documents were used. The application's most important lessons are thedifficultyofidentifying and measuring activities, the model’s requirement of high-quality data and the complexity of the capacity measures.