Contents

Calculation (Estimation) ....................................................................................................................... 3

Time Operating ....................................................................................................................................... 3

Time Unavailable .................................................................................................................................... 3

Time Available........................................................................................................................................ 4

Total of Operating Time .......................................................................................................................... 4

Cost Per Minutes ..................................................................................................................................... 4

Activities................................................................................................................................................. 5

Total Cost................................................................................................................................................ 8

Discussion .............................................................................................................................................. 9

Question 2: WHY DIDN’T LUC JOREN DECIDE TO IMPLEMENT RATE BASED ABC, BUT
CHOSE TIME DRIVEN INSTEAD? ...................................................................................................... 9

Question 3: WHAT ARE ADVANTAGES AND DISADVANTAGES OF TIME DRIVEN ABC

COMPARED TO RATE BASED ABC. ................................................................................................ 11
Calculation (Estimation)

Time Operating

Operation Day Hours Minutes

Time
Monday (52 weeks*1 day) – 4 16Hr*48 days= 768Hr*60= 46080 mins
days holiday = 48 768Hr
days
Tuesday- (52 weeks*4day) – 4 24Hr*204 days= 4896Hr*60= 293760 mins
Friday days holiday = 204 4896Hr
days
Total = 339840 mins

Time Unavailable

Operation Time Start-up Shutdown Total

52 weeks 15 mins 15 mins 52 weeks*(15+15) = 1560
mins
Time Available

Time Available = Time operating – Time Unavailable

= 339840 – 1560

= 338280 mins

Total of Operating Time

Total of Operating Time = Time Available – Idle-Time 15% of time available

= 338280 – (15%*338280)

= 287538 mins

Cost Per Minutes

Cost Per Minutes = Total Cost Attributes / Total of Operating Time

= 3100000 / 287538

= $10.78
Activities

Adaptation of the machine to the new quire

Mins X1 X2 X3 X4
Large 45 - 1 1 1
Normal 30 - - - -
Small 15 1 - - -
Black 10 - - - -
Total 15 mins 45 mins 45 mins 45 mins

Start-up Phase
Mins X1 X2 X3 X4
Goes well 12.0 1 1 1 1
Inexperience 8.0 - 1 1 1
Black & White -4.0 - 1 - -
Demanding 30.0 1 - - -
More 45gr to 4.5
- 1 - 1
90gr
Small adaptation 0.0 - - - -
Normal 10.5
- - - -
adaptation
Large adaptation 18.0 - 1 1 1
Total 42 mins 38.5 mins 38 mins 42.5 mins
 Printing Permission
Mins X1 X2 X3 X4
Permission 10 1 - - -
Highly
5 1 - - -
Demand
New Customer 4 - - - -
Total 15 mins - - -

Printing & Folding

Rotation X1 X2 X3 X4
48 pg A4 45,000 - - - 1
Minor Paper Quality -5000 - - - 1
High Occupation Ink -5000 - - - 1
Number of Copies
-5000 - - - 1
<40,0000

2 x 24 pg A4 40,000 1 - - -
Minor Paper Quality -2000 - - -
High Occupation Ink -2000 1 - - -
Number of Copies
-2000 - - - -
<40,0000

1 x 24 pg A3 40,000 - - - -
Minor Paper Quality -2500 - - - -
High Occupation Ink -2000 - - - -
Number of Copies
-15000 - - - -
<40,0000
2 x 12 pg A3 30,000 - - 1 -
Minor Paper Quality -1500 - - -
High Occupation Ink -1000 - - -
Number of Copies
-1000 - - - -
<40,0000

2 x 36 delta 28,000 - 1 - -
Minor Paper Quality -1000 - - - -
High Occupation Ink -500 - - - -
Number of Copies
-500 - - -
<40,0000
Total Rotation 30,000 28,000 30,000 30,000
Number of Copies 4,000,000 3,500,000 900,000 5,500
Machine Minutes (Number of Copies
133 Mins 125 Mins 30 Mins 0.18 Mins
/ Total Rotation)

Changes Between Time

Mins X1 X2 X3 X4
Additional 2 (2 times
5 - 1
startup phase changes)
Large amount
4 - - - -
of changes >5
2 (2 times
Small adaption 15 - - -
changes)
Black Adaption 10 - - - -
Total - 5 40 -
 Preventive Maintenance
Mins X1 X2 X3 X4
Carried out 30 1 1 1 1
Total 30 mins 30 mins 30 mins 30 mins

Other Activities
Mins X1 X2 X3 X4
Carried out 20 1 1 1 1
Total 20 mins 20 mins 20 mins 20 mins

Total Cost

Activities X1 X2 X3 X4
Adaptation of the 15 mins 45 mins 45 mins 45 mins
machine to the new quire
Start-up phase 42 mins 38.5 mins 38 mins 42.5 mins
Printing permission 15 mins - - -
Printing & Folding 133 mins 125 mins 30 mins 0.18 mins
Changes Between Time - 5 mins 40 mins -
Preventive Maintenance 30 mins 30 mins 30 mins 30 mins
Other Activities 20 mins 20 mins 20 mins 20 mins
Total minutes 255 mins 263.5 203 mins 137.6 mis
Total Cost (Total
minutes activities * Cost $2,748.9 $2,835.14 $2,188.34 $1,483.32
per minutes)
Discussion

Question 2: WHY DIDN’T LUC JOREN DECIDE TO IMPLEMENT RATE BASED ABC,
BUT CHOSE TIME DRIVEN INSTEAD?

Driver Rate Activity Based Costing (DRABC)

Driver Rate Activity Based Costing is one of the methods of Activity Based Costing
(ABC), which has been systematically used to varying degrees since the 1980s. It has increased
in importance on the basis of the principle of cost distribution owing to the ever-increasing
proportion of indirect and mutual support spending to the total arising primarily from the growth
of greater variety and complexity of product and service offerings

DRABC operating metrics leverages are practical mechanisms for assigning costs to
"economic items" whether they are goods, resources, platforms or consumers. Usually, each
given expense assignment hires a single driver, and it's a driver that substitutes quantity, sales, or
otherwise simplistic method.

Thus, by measuring the impact of product variability and complexity as well as volume,
DRABC achieves considerably better cost efficiency relative to conventional costing

Time Driven Activity Based Costing (TDABC)

TDABC is a costing approach that represents the expense and capability requirement and
using projected unit times to measure time as a driver instead of a single driver quantity. TDABC
uses a multi-driver approach to achieve an even greater degree of separation and cost variation
between specific input objects than DRABC.

TDABC usually measures costs at a more granular level, such as purchase, invoice,
shipment, or delivery line. In TDABC, a cumulative period is determined based on the
representation of an algorithm, also known as a 'time calculation,' for each list of expense items.
This time factor requires multiple drivers (unlike the standard DRABC driver) to be used. This
allows for the flexibility to catch more complexity and variation in the actions of a cost item
 Steven R. Anderson and Robert S. Kaplan introduced the TDABC approach in their
paper, "Time-Driven Event Based Costing" (Havard Business Review, Volume 82, No. 11), in
November 2004. In their 2007 book, Time-Driven Activity Based Costing, published by the
Havard Business School Press, they expanded their viewpoints.

This is why,

Luc Joren decided to chose Time-Driven Based Activity Costing is because of Corelio Printing
found that the current costing systems failed to allocate the overhead cost;

a) Over and under capacity were not revealed.

b) The cost of non-planned stoppages was unknown such as printing changes, technical
problem, etc.
c) Though significant as to the strategy of Corelio Printing, non-productive overhead was
allocated extremely simple and inaccurate based on machine-hours.

By using TDABC, Luc Joren can overcome those failure since TDABC use multiple drivers
which allows for the flexibility to catch those overhead cost. In fact, TDABC can designate
funds directly for expense goals, to make it more efficient for customer orders. At the same time,
time driven helps to identify costs per quire, client, order and machine which are all influenced
by time.
Question 3: WHAT ARE ADVANTAGES AND DISADVANTAGES OF TIME DRIVEN ABC
COMPARED TO RATE BASED ABC.

TDABC VS RBABC

TDABC RBABC

Pros:
- Allows cost-driver values more
reliable by requiring unit times to be
calculated even for large, specialized
transactions.
- Precise strategic cost and productivity,
simple, inexpensive and easy to build.
- Identifies systems that are inefficient and
aim for change.
- Discovering which procedures cost
needless and wasted
Cons
Pros:
- Works best in a small context,
usually a single agency, plant or
venue, under which it was initially
introduced.
Cons
- Not ideal for carrying out this method
on a wide scale for permanent use.
- Fail to capture the complexity of actual
operations.

- Collection and preparation of

data is time-consuming.
- The source data from standard
accounting records is not always readily
available.
- Cannot be as useful for businesses with
low overheads in comparison of overall
operating costs