Time-Driven Activity-Based Costing in service companies: a comparative case study: FRENCH, BELGIAN, TURKISH AND THAI

Abstract

The costing of services is a complex task due to the intangible nature of many services and the difficulty in identifying the resources and activities that contribute to their production. This leads to challenges such as the allocation of indirect costs, the identification of cost drivers, and the measurement of productivity. In order to address these challenges, management control tools such as Time Driven ABC (TD_ABC) have been developed.

TD_ABC is an innovative cost management technique that allows cost models to be designed for complex operations. The model works by modeling the time spent for each activity as a function of one or more parameters called time indicators. This provides a more accurate and detailed representation of the resources consumed by a service, which in turn allows for more accurate cost allocation and identification of cost drivers.

This paper is the result of a comparative study of four case studies that aimed to evaluate the strengths and weaknesses of TD_ABC as a management control tool in the context of service companies. The research highlights the potential benefits of the method, such as improved productivity measurement, planning, profitability analysis, internal benchmarking, and decision support. However, the study also reveals some limitations of the method, such as measurement error, specification error, aggregation error, and error in the allocation of fixed costs.

Overall, the research provides valuable insights into the challenges of costing in service companies and the potential of TD_ABC as a management control tool. The findings suggest that further research is needed to address the limitations of the method and to explore its potential in different service contexts.