TDABC Capabilities for performance measurement: A case study in a manufacturing context

Supply chain costing presents a sophisticated alternative to traditional costing allowing an accurate cost estimation and effective decision making. In exploring different techniques, TDABC was not explored extensively compared to its peers. In addition to the infancy of the technique, there is an on-going debate about the capability of the TDABC specifically in manufacturing context. The present study contributes to the debate by applying TDABC at the logistics function of a manufacturing site and assesses it capability to measure performance in the stated context

a systematic literature review

The healthcare sector is facing major environmental changes and increasing costs. These are creating new challenges and requiring new methodologies to assure quality performance and financial sustainability for medical institutions. Therefore, this study aims at systematically reviewing literature on management accounting and control (MA&C), in particular activity-based costing (ABC), balanced scorecard (BSC), time-driven activity-based costing (TDABC) and total quality management (TQM) in healthcare. Results show considerable research conducted on these topics, mostly originating in Europe and North America, despite a lot of TQM articles originating from Asia. The majority of the articles included are research articles, mostly collecting data from secondary data, interviews and surveys

Costing of healthcare services in Bulgaria – guidelines for implementing some good practices

Costing of healthcare services is one of the most severe challenges facing hospitals’ accounting and management teams.The article presents the characteristics, advantages, and limitations of three different approaches to costing medical services – Time-Driven Activity-Based Costing, Target Costing, and Micro-Costing. We provide a summary of theinternational experience in their application, and guidelines for their implementation in the Bulgarian context.Aligning the costing systems with current developments in the management accounting field has the potential to improve hospitals’ cost management and their financial condition.At a health system level, accumulating reliable information on the actual cost of medical services would facilitate theprocess of setting fair reimbursement prices and thus result in more effective ways to spend the scarce resources

The role of management accounting systems in public hospitals and the construction of budgets

The role of management accounting systems (MAS) in the construction of budgets in the public health sector has been one of the least studied topics in the international literature. Furthermore, several studies have confirmed the loss of relevance of traditional approaches to budgeting due to the need to implement techniques that are more output and performance-oriented. Since public hospitals are organisations that depend significantly on public funds, with substantial impacts on governments’ budgets, the pressure for reducing expenditures is strong, causing increased difficulties in hospital management, which is becoming more and more complex every day. In order to analyse the role of MAS in the preparation of budgets in public hospitals, this chapter presents a literature review on this topic. This review allows to conclude that the implementation of different kinds of budgeting is heavily influenced by governments and professionals. Nevertheless, the research on this topic is still very scarce, evidencing the need to continue studying.(undefined

Management accounting and control systems in healthcare: a systematic literature review

The healthcare sector is facing major environmental changes and increasing costs. These are creating new challenges and requiring new methodologies to assure quality performance and financial sustainability for medical institutions. Therefore, this study aims at systematically reviewing literature on management accounting and control (MA&C), in particular activity-based costing (ABC), balanced scorecard (BSC), time-driven activity-based costing (TDABC) and total quality management (TQM) in healthcare. Results show considerable research conducted on these topics, mostly originating in Europe and North America, despite a lot of TQM articles originating from Asia. The majority of the articles included are research articles, mostly collecting data from secondary data, interviews and surveys

Software support for cost calculation - application to the agricultural sector

Calculation of product costs is the source of information on the costs of selected produced products with great explanatory power. In current practice, the overhead costs on farms are monitored and calculated by species. They are allocated using an allocation base (average state of the animals, harvested area in hectares) or are converted using direct costs of the activity as an allocation base. With the current high level of overheads, this method cannot be considered effective. Only type classifications are monitored and are therefore anonymous in relation to activities. We consider high overhead costs as a good reason for implementing and using the methods of Activity Based Costing. In this paper we present a proposed model of Activity Based Costing for its use in agriculture, created in MS Excel. We create the model as a basic version, which can be more closely defined depending on the particular conditions of the business implementing the model. We complete the general model for better illustration with figures on costs. We present a comparison of model results with the traditional approach of calculating costs in agriculture. One of the biggest benefits of the ABC system is the binding of costs from accounts, activities performed and the cost of products in one system. We present a statistical comparison of model results with the traditional approach of calculating costs in agriculture

Unit Costing of Health Extension Worker Activities in Ethiopia: A Model for Managers at the District and Health Facility Level

Background Over the last decade, Ethiopia has made impressive national improvements in health outcomes, including reductions in maternal, neonatal, infant, and child mortality attributed in large part to their Health Extension Program (HEP). As this program continues to evolve and improve, understanding the unit cost of health extension worker (HEW) services is fundamental to planning for future growth and ensuring adequate financial support to deliver effective primary care throughout the country. Methods We sought to examine and report the data needed to generate a HEW fee schedule that would allow for full cost recovery for HEW services. Using HEW activity data and estimates from national studies and local systems we were able to estimate salary costs and the average time spent by an HEW per patient/community encounter for each type of services associated with specific users. Using this information, we created separate fee schedules for activities in urban and rural settings with two estimates of non-salary multipliers to calculate the total cost for HEW services. Results In the urban areas, the HEW fees for full cost recovery of the provision of services (including salary, supplies, and overhead costs) ranged from 55.1 birr to 209.1 birr per encounter. The rural HEW fees ranged from 19.6 birr to 219.4 birr. Conclusion Efforts to support health system strengthening in low-income settings have often neglected to generate adequate, actionable data on the costs of primary care services. In this study, we have combined time-motion and available financial data to generate a fee schedule that allows for full cost recovery of the provision of services through billable health education and service encounters provided by Ethiopian HEWs. This may be useful in other country settings where managers seek to make evidence-informed planning and resource allocation decisions to address high burden of disease within the context of weak administrative data systems and severe financial constraints

A comparative study of activitybased costing (abc) and time-driven activity-based costing (tdabc) on cost accounting

In any business competition, it is important for the company to incorporate an accurate cost estimation to decide the best price for products to gain profits. By the 1980s, Traditional Cost Accounting (TCA) is no longer reflecting the current economic reality due to distorted information about the profitability of the company’s orders, products, and customers. In addition, Activity-based Costing (ABC) is a costing method originally developed to overcome the shortcoming of TCA method in the era of rapidly increasing product complexity and diversification. However, it is not universally accepted because it ignores the potential for unused capacity which will be beneficial for forecasting. Nevertheless, the current published work does not clearly state of capacity cost rate, practical capacity and time equation. The aim of this work is to compare the advantages of ABC and Time-driven Activity-based Costing (TDABC) by analyzing the features towards costing sustainment. The work begins by collecting data at electrical and electronic industry located at Pahang and the product selected is a magnetic inductor. ABC focuses on the costs inherent in the activity-based products to produce, distribute or support the products concerned. TDABC uses time equation and capacity cost rate to measure the unused capacity with respect to the time and cost. Through ABC method, this work successfully gathered the time allocated by operator to complete the task given. The largest time allocated by operator is at epoxy application activity which is 43.89% and the smallest is 0.63% at oven curing. The highest amount of cost of capacity is epoxy application activity with cost of MYR 1,665,729.98 and the amount of material used is selected as the cost driver. As the demand quantity of the product is increase by 10%, the total cost of production is predicted to be MYR 4,260,115.20 while the unit product cost is forecast at MYR 0.81. Through TDABC method, this work gains information on practical capacity of operator which is 123,600 minutes. Moreover, the capacity cost rate for winding activity is MYR 2.53 and the time equation is 0.12χ1 with χ 1 as variable of amount of raw material of 8,697.6 kilograms. All sub-activities are analyzed and categorized in 3 categories which are optimistic, most likely and pessimistic. There are 7 sub-activities under optimistic category, 6 sub-activities under most likely and 4 subactivities under pessimistic. In conclusion, by implementing and comparing of ABC and TDABC at the company, this work proves TDABC is a method with objective cost driver determination, removes time consuming process, have multiple cost drivers and able to forecast and planning using analysis of capacity utilization. Thus, TDABC can improve the company costing structure by using the advantages of TDABC in order to gain detailed decision-making process

Application of lean thinking tools to municipal services

JEL Classification System: M110 – Business Administration: Production Management; H70 – Public Economics: State and Local Government.Efficiency and effectiveness of services provided by public organisations have impact in customers’ satisfaction. The current research has as main goal to analyse if lean tools create efficiency and effectiveness gains when applied to a specific set of processes from a public service. Accordingly, lean thinking background is considered. The methodology adopted is based on a case study developed in the Education Department of the city council of Arruda dos Vinhos. Direct observation and informal interviews with staff members and customers are performed. Three processes are analysed using Value Stream Mapping (VSM) tools: application for free school meals for students who apply for social benefits, application for “home-school-home” transport allowance, and money refund from transport expenses. The lean tools used are the VSM big picture map, process activity mapping, and spaghetti diagram. Processes’ customers are identified and what they consider value is assessed. Wastes are identified and suggestions for improvement are developed. Findings show that gains in effectiveness are expected if the suggestions provided are implemented, the process would be more accurate and the outcome would be obtained sooner and without mistakes resulting in more value for customers; regarding efficiency, based on the elimination of waste processes’ total times reduction is expected in the three cases (useful time can be reduced by 29% in the first process, 47% in the second, and 34% in the last one), less human resources’ time is required and shorter distances are covered

Supplier's total cost of ownership evaluation: a data envelopment analysis approach

Supplier Total Cost of Ownership (TCO) is a widely-known approach for determining the overall cost generated by a supplier relationship, but its adoption is still limited. The complex calculations involved - and in particular the activity-based costing procedure for computing the cost of managing the relationship - pose a major obstacle to widespread TCO implementation. The purpose of this work is to formulate a Data Envelopment Analysis application (denoted 'TCO-based DEA') that can act as a proxy for TCO, and to test its ability to approximate the results of TCO with less effort. The study is based on the analysis of two categories of suppliers (74 in total) of a medium-sized Italian mechanical engineering company. The results show that TCO-based DEA is able to significantly approximate the outcomes of TCO, for both the efficiency indexes and rankings of suppliers, whilst requiring substantially less effort to perform the analysis. To our knowledge, this is the first study to develop a DEA-based tool for approximating TCO and to test it in a real-world setting. The research shows significant potential within the supply chain management field. In particular, TCO-based DEA can be used for analysing suppliers' performance, rationalising and reducing the supplier base, assisting the negotiation process