Implementation of TDABC in SME: A Case Study

Abstract

This article describes a procedure that allows small‐scale manufacturing industries to easily adapt time driven activity based costing system. This model is of two stages, the first stage consists of seven steps and the second step consists of three steps. The model was developed on the basis of an intensive case study conducted at a small‐scale furniture manufacturing industry. The model assigns the cost of overhead expenses such as building rent, building maintenance, power consumption, machine maintenance cost, and chemical consumable on the activities. Thereafter, the cost of activity is assigned to the product. The complete process is explained using matrices. This makes the cost‐related calculations easy and overhead costs are traced without difficulty. The ease of use of the proposed procedure is illustrated using actual data from a small manufacturing industry located in central India. Further, based on this model a generalized equation is developed. Results of the case study help the firm's strategic decision making and identify the opportunities for profitability improvement. © 2018 Wiley Periodicals, Inc.