Author: Robert S. Kaplan and Steven R. Anderson

Publisher: Harvard Business School Press (Boston, MA)(2007)

ISBN-13: 978-1-4221-0171-1

Time-Driven Activity-Based Costing is a 266 page, hardbound book, retailing for $45 (US). Part one, “fundamentals of time-driven activity-based costing,” includes the first 7 chapters. Part two, “time-driven activity-based costing in action,” includes the next 7 chapters – likely to prove to be useful, applications-based case studies to the reader, and representing a variety of industries. There are two appendices. The first deals with strategies to transform unprofitable customers into profitable ones. The second contains answers to frequently ask questions. A very interesting preface precedes the contents, which are followed by an index and a brief author biography.

As an accounting professor, engaged in teaching cost accounting and cost management courses, I am well aware of Professor Kaplan’s work on activity-based costing (ABC), as well as his works on benchmarking and the balanced scorecard (BSc). The concept of ABC was developed in the 1970s and 1980s, but gained broad interest in the early 1990s, following coverage of this topic in Kaplan’s co-authored texts and articles in the late 1980s and the availability of the relatively cheap and significantly more powerful computers needed to operate the relational data base software (e.g., Oracle®, PeopleSoft®, Access®, and, particularly, SAP®) needed to more efficiently operate and develop ABC data for improved decision-making.

In this latest installment, Kaplan and Anderson appear to have refined and significantly shortened the ABC development process in what might be referred to as “ABC light.” Instead of spending months (or years) interviewing personnel and developing an activities dictionary, only to hope that some “big hits” will (eventually) be identified when traditional costing systems are replaced (or complemented) by ABC, Kaplan and Anderson have developed a form of ABC that requires the estimation of only two parameters: (1) unit cost and (2) time.

What could be more natural (or desirable)? Time cannot be stored for later use. Time, once wasted, is lost forever. And as product life cycles shorten, time is of great consequence in an ever-increasingly competitive global economy. So ABC has, now, been streamlined to become time-driven ABC (TDABC). Just as products, services and industries go through a life-cycle; TDABC extends the life and potential for applications of ABC.

Historical successes and failures of traditional ABC systems are addressed in the introductory chapter. The chapters are well-written and provide many illustrative tables and graphics to reinforce concepts and mechanics addressed in the body. A reader is likely to want to spend several days or a few weeks reading and re-reading this book, while consciously (and subconsciously) considering its potential for application to his/her firm.

If you understand the basics of ABC, this book represents a sound investment to extend your knowledge on the topic. If you have, previously, attempted to benefit from traditional ABC, and failed, you might find this book of interest, as it provides an alternative to the more costly and time-consuming, traditional approach. If you ever felt that traditional ABC systems are too costly (and risky) to contemplate for your smaller firm, read this book and reconsider this decision. I recommend this book to be purchased, read, and re-read, by those seeking greater insights into their firms’ operations and the applicability of TDABC as a vehicle with the potential to facilitate improved operations and profitability.

The above review was contributed by:  Anthony (A.J.) Cataldo II Ph.D    Professor of Accounting, West Chester University. Dr. Cataldo holds a PhD from Virginia Polytechnic Institute and State University , MAc ( University of Arizona)  unofficial minor in Marketing , BSBA  (University of Arizona). He is a Certified Management Accountant and a Certified Public Accountant:  Click Here to view Anthony's Reviews. 

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