Measuring Cost In Value Equation Using Time -Myassignmenthelp.Com

Question: Discuss About The Measuring Cost In Value Equation Using Time? Answer: Introduction In manufacturing business corporations, the cost accounting plays a vital role. Cost accounting actually refers to summarize, analyze, process to record, evaluate and allocate various sorts of courses of actions to control the organizational cost or liability. Controlling cost helps to reduce the organizational costs that pilot high profitability (Drury, 2013). The business organizations are generally inclined towards implementing various types of costing system for their organizations like traditional costing system, activity based costing and many others. In contemporary times, the rise of another important costing system can be absorbed and that is widely known as Time Driven Activity Based Costing (TDABC) (Helmers Kaplan, 2016). It can be perceived that the traditional costing approach is most popular costing approach among the business organizations. Nevertheless, in recent times the business concerns are experiencing numerous step backs while using the traditional costing syst em. Due to this reason, R. S Kaplan and S.R Anderson has developed TDABC in the year of 2004 in order to overcome the issues regarding usage of traditional costing approach and ABC (Kaplan et al., 2014). The chief objective of this report is to evaluate and analyze numerous features of TDABC and to explain how implementation of TDABC is appropriate. According to the information provided, the responsibility of the management consultancy organizations to explain the appropriate way to implement TDABC to the clients. Numerous parts of this report explain the features, description and comparisons of ABC and Traditional Costing and Sustainability of TDABC in the client business organizations. Description of the client The client of the consultancy business organization is a company that manufactures tires of the cars; named Ansell. The major operation of the organization is to manufacture tires for various automobiles. The aim of the management of the organization is to manufacture products of the highest quality. The high quality products might be manufactured when there is presence of lesser variation in the process of the production (Bahr Price, 2016). In the operation of production of Ansell, variation can be noticed in the total manufacturing process. Presently, the traditional costing approach is used by the business organization in their process of manufacturing products. The CEO of the organization recently considered the adoption and implementation of TDABC in their process of manufacturing as the variances can effectively put negative influences in the outputs of the organizations. Time Driven Activity Based Costing (TDABC) The previous discussion explains the basic idea of TDABC has been eventually developed in order to overcome various issues of traditional costing approach and ABC. In the process of TDABC, the resources costs are assigned with the cost objects in order to help two particular sets of estimate and those are; The cost per time unit for resource supply capability to cost activities Estimation of the mandatory time units for performing any activity Multiplication of the cost per unit of every resource group by the anticipated time for each of the activities Features: In TDABCs case, it can be found out that this specific approach has few particular features and they are as follows: Under the procedures of TDABC, it tends to become a lot easier for the cost accountants to allocate cost to various manufacturing activities. Along with that, the procedure also takes lesser time for working. TDABC integration can also be done in an easier way with the available or existing ERP or Enterprise Resource Planning system of the organizations which enhances the manufacturing procedures of the companies. All the production managers tend to become capable of generating correct monthly operation reports with necessary help from TDABC. The costing system under TDABC is also considered to be more competent than ABC and the conventional costing system because it uses the manufacturing capability of the organizations properly. The implementation procedure of TDABC is helpful for the production managers in effectively forecasting the demands of resource. TDABC implementation also provides a cost effective and faster changes within the models of costing. The TDABC implementation also makes small yet significant available information for the managers in order to solve the various types of issues associated with the manufacturing procedures. One of the most significant features of TDABC is that it can be implemented in an easier way and can be utilized in any industry. All the above characteristics of TDABC indicate the dominance of the costing system compared to any other available system. It is necessary to mention that TDABC has significant differences with the traditional costing system. Simultaneously, there are some important differences between ABC and TDABC approaches. The next section discusses the differences between both the systems: TDABC vs. ABC system The ABC system is considered as the answer of the incorrect methods of the accounting standards of America. The major areas of concern of the ABC costing system is associated with the fact that how much has been already done for the activities rather than how much has been spent. On the contrary, the major areas of concern for the TDABC costing system is associated with the recognition of the capability of every department or procedures for making the cost allocation of the capability of each of the resource groups over the cost objectives on the basis of the essential time for performing every activity. Considering the ABC process, one can find out a number of cost pools with several kinds of cost drivers. The cost pool is regarded as the entire cost related to an individual activity and the cost driver is considered as a major feature of Abc which affects the performance and cost of the cost activities. In terms of TDABC system, a decline in the work demand within a specific depart ment can be found out and the procedures of TDABC is helpful for the managers within any organization for estimating the released necessary resource quantity. It also indicated that TDABC is capable of capturing different features of any individual cost activity with necessary help of estimated timeframe. As far as the procedures of ABC are concerned, the indirect costs are allocated on the specific cost activities, therefore they are assigned on specific cost objectives. Along with that, with necessary help from the cost drivers, the operating costs of indirect resources are also assigned with cost activities. In terms of TDABC, its developed equations helpful for allocating the time and cost in individual activity on the basis of its specific features. Nonetheless, in both the bases of ABC and TDABC, computations are done in six specific stages. Therefore, from this discussion, it can be found out that the major differences of both the systems of ABC and TDABC. Traditional costing approach vs. TDABC The significant differences among the traditional costing system and TDABC are that TDABC is a complex system while the traditional costing system is simpler. Under the traditional costing system; there is a need of the cost objectives and the used resources to evaluate numerous cost activities, but the TDABC system, numerous cost activities might be seen regarding the activities that are used in cost objectives (Rumble, 2012). The board members of the business organizations generally adopt the TDABC system when high amount of overheads are present with the huge numbers of various miscellaneous products. Requirement of accurate and reliable way to manage the organizational costs is immense in the market. It is noticed that in traditional single costing system, usage of single overhead pool might be unable to calculate the true cost. In the method of traditional costing system, various random allocation of the cost objects might be seen on the basis if machine hours or labor (Cooper, 2017). It can surely be considered as a significant difference. The inclusion of the products that are identifiable might be seen in the TDABC where accumulation of numerous expenses like depreciation, salaries and many others can be seen in the traditional costing system. Apart from that, in the process of traditional accounting system the accountants determine the production cost based on the customers feedback and the pocket range. Implementation of TDABC helps to lower the cost of production to increase the productivity (Cohen, 2014). Thus, it can be said that there are significant differences among TDABC and the traditional costing system. Suitability of TDABC The discussion above describes various aspect of TDABC like features, differences and others. It is important to determine whether TDABC is suitable in manufacturing organizations. The discussion in this part of this report explains how appropriate TDABC can be in the business organizations. TDABC has got the potential to create an appropriate insight in various cost activities that are carried out by the business organizations. In relation to the costs linked in the traditional accounting system, the data regarding costs play a vital role to strategic decision making to continue the process of the organization. so, in the absence of TDABC, the business concerns would not be able to evaluate the effect of individual activities on the profitability of the business organization (Schulze, Securing Ewering, 2012). Another major benefit of the implementation of TDABC is the difference between the capacity that is uses and the capacity that is supplied. The whole process of calculating the needed time to continue various activities and also to link them with the cost calculations that provides powerful insights regarding cost management to the supervisors or the managers. System of DABC covers all the sectors of enterprise resource planning and because of this the precise costs can with ease follow each and every order transaction of the business concerns. The implementations of TDABC explain a precise picture of the processes to give out costs to some specified customers to empower the profitability analysis relationship (Hoozee 2013). Most significantly, various implementations of TDABC help to manage the business organizations to take the correct decisions. In this way, the business organizations acquire the ability to identify various business processes using the help of TDABC, and it allows the organization to negotiate with the clients in a better way (Carli canavari, 2013) Model of TDABC helps the business organizations to identify the cost opportunities to enhance the efficiency of the process of production. Apart from that, it helps to enhance the capacity of production of the business organizations (Namazi, 2016). It requires mentioning that the model of TDABC might be updated easily according to the style of operations of the organizations. The discussion above explains how useful TDABC is in the business organizations. Implementation of TDABC in the organization like Ansell will help to increase the production process efficiency (Kaplan et al., 2015). Then the management of TDABC can acquire appropriate insight regarding the nature of the cost of the organization; because in integration of TDABC with various other system of the organization like planning of enterprise recourse and many others. So from the above mentioned discussion it can be perceived that TDABC will be appropriate for Ansell. Conclusion The report explains that TDABC is a new approach for cost accounting in the business organizations. The aspects of TDABC explain that the new system is easier to assign various cost activities and it can be integrated with the ERP system. It is seen that TDABC has some basic differences with the traditional costing system and ABC system as it can be implemented in diversified organizations with many overheads as well as many products. 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