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On the determinants and the role of costing accuracy of time-driven activity-based costing

Sophie Hoozée UGent (2010)
abstract
To overcome the difficulties associated with activity-based costing (ABC) in dynamic environments and to better capture the full complexity of activities, Kaplan and Anderson (2004) developed time-driven ABC (TDABC). The new technique is supposed to deliver accurate and relevant cost and profitability information for decision making and control, supporting continuous improvement of managers? business operations in a quickly changing setting. This dissertation scrutinizes these claims by means of three studies that provide valuable insights into the working and use of TDABC. The first study focuses on measurement errors in time equation input parameters and uses mathematical statistical methods to examine the impact of adding terms to time equations on the accuracy and the precision of estimated activity times. Formal conditions are derived under which this refinement improves activity time estimates. The second study compares the overall accuracy of TDABC versus ABC in complex and dynamic environments. Through simulation analysis, the difference in cost outcomes between both systems is analyzed as a function of (1) different degrees of capacity utilization, (2) diversity in the total actual productive time spent on activities, (3) error in the estimated percentage mix required for calculating ABC costs due to altered activity driver volumes, and (4) measurement error in the unit time estimates required for calculating TDABC costs. The results reveal that in complex and dynamic environments, in most cases, TDABC will outperform ABC. The noteworthy exception is found when diversity in the actual mix of productive work is high; then, the relationship reverses. The third study deals with behavioural aspects involved in the design of a TDABC system. More specifically, to identify the antecedents of operational improvements in the design of a TDABC system, a case study was undertaken because this method enables direct, in-depth, and extended contact with the research participants. Collective worker participation and appropriate leadership styles appeared to be crucial explanatory factors. The case study also sheds light on how the search for accurate time equations and operational improvements are intermingled. In particular, during group discussions about time estimate accuracy, a negotiation process towards feasible time standards developed in an intertwined fashion.
Please use this url to cite or link to this publication:
author
promoter
UGent and UGent
organization
year
type
dissertation (monograph)
subject
pages
XII, 141 pages
publisher
Ghent University. Faculty of Economics and Business Administration
place of publication
Ghent, Belgium
defense location
Gent : Het Pand (zaal rector Vermeylen)
defense date
2010-06-03 16:00
language
English
UGent publication?
yes
classification
D1
copyright statement
I have transferred the copyright for this publication to the publisher
id
970901
handle
http://hdl.handle.net/1854/LU-970901
date created
2010-06-07 13:17:10
date last changed
2013-08-08 09:13:40
@phdthesis{970901,
  abstract     = {To overcome the difficulties associated with activity-based costing (ABC) in dynamic environments and to better capture the full complexity of activities, Kaplan and Anderson (2004) developed time-driven ABC (TDABC). The new technique is supposed to deliver accurate and relevant cost and profitability information for decision making and control, supporting continuous improvement of managers? business operations in a quickly changing setting. This dissertation scrutinizes these claims by means of three studies that provide valuable insights into the working and use of TDABC. 
The first study focuses on measurement errors in time equation input parameters and uses mathematical statistical methods to examine the impact of adding terms to time equations on the accuracy and the precision of estimated activity times. Formal conditions are derived under which this refinement improves activity time estimates.
The second study compares the overall accuracy of TDABC versus ABC in complex and dynamic environments. Through simulation analysis, the difference in cost outcomes between both systems is analyzed as a function of (1) different degrees of capacity utilization, (2) diversity in the total actual productive time spent on activities, (3) error in the estimated percentage mix required for calculating ABC costs due to altered activity driver volumes, and (4) measurement error in the unit time estimates required for calculating TDABC costs. The results reveal that in complex and dynamic environments, in most cases, TDABC will outperform ABC. The noteworthy exception is found when diversity in the actual mix of productive work is high; then, the relationship reverses.
The third study deals with behavioural aspects involved in the design of a TDABC system. More specifically, to identify the antecedents of operational improvements in the design of a TDABC system, a case study was undertaken because this method enables direct, in-depth, and extended contact with the research participants. Collective worker participation and appropriate leadership styles appeared to be crucial explanatory factors. The case study also sheds light on how the search for accurate time equations and operational improvements are intermingled. In particular, during group discussions about time estimate accuracy, a negotiation process towards feasible time standards developed in an intertwined fashion.},
  author       = {Hooz{\'e}e, Sophie},
  language     = {eng},
  pages        = {XII, 141},
  publisher    = {Ghent University. Faculty of Economics and Business Administration},
  school       = {Ghent University},
  title        = {On the determinants and the role of costing accuracy of time-driven activity-based costing},
  year         = {2010},
}

Chicago
Hoozée, Sophie. 2010. “On the Determinants and the Role of Costing Accuracy of Time-driven Activity-based Costing”. Ghent, Belgium: Ghent University. Faculty of Economics and Business Administration.
APA
Hoozée, S. (2010). On the determinants and the role of costing accuracy of time-driven activity-based costing. Ghent University. Faculty of Economics and Business Administration, Ghent, Belgium.
Vancouver
1.
Hoozée S. On the determinants and the role of costing accuracy of time-driven activity-based costing. [Ghent, Belgium]: Ghent University. Faculty of Economics and Business Administration; 2010.
MLA
Hoozée, Sophie. “On the Determinants and the Role of Costing Accuracy of Time-driven Activity-based Costing.” 2010 : n. pag. Print.