Abstract:

Since the middle of 1980s, it has begun to be accepted that the traditional costing system could not adapt to the changing structure of production and could not offer an efficient and accurate cost information. To eliminate the shortcomings of traditional costing systems and as a more effective cost approach to changing production techniques, Activity Based Costing system has been proposed. However, the difficulties in the implementation and maintenance of the Activity Based Costing system and its complex structure have prevented it from being an efficient, up-to-date, and innovative costing system. Overcoming the difficulties of Activity Based Costing system, Time Driven Activity Based Costing system was developed as an innovative cost system that provides simpler, more accurate, and meaningful cost information and that can be more easily implemented and updated. Thus, the decisions taken by using a more realistic and accurate cost data will be more accurate. In this study, overhead expenses of a firm that produces automotive components have been distributed to the product lines according to the Activity Based Costing system and then according to the Time Driven Activity Based Costing system by using the case study method and the differences between the Activity Based Costing and the Time Driven Activity Based Costing system were revealed. Results of the study showed that the Time Driven Activity Based Costing system produced lower cost compared to the Activity Based Costing because it does not include the idle capacity cost to the product cost. The Time Driven Activity Based Costing system calculates more accurate cost information while revealing the idle capacity. Therefore the Time Driven Activity Based Costing attracts managers’ attention to the areas where the idle capacities exist.

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