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The Impact of Refinement on the Accuracy of Time-driven ABC.

Recently, time-driven activity-based costing ( ABC) has been developed as a cost modelling technique in which transaction times (that is, times required for particular occurrences of an activity) are calculated using time equations. This paper develops a model of the error structures in time-driven...

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Published in:Abacus Vol. 48; no. 4; pp. 439 - 473
Main Authors: Hoozée, Sophie, Vermeire, Lea, Bruggeman, Werner
Format: Article
Published: Wiley-Blackwell Dec2012
Subjects:
Activity-based costing
Equations
Time management
Long run (Economics)
Sampling errors
Cognitive psychology
Stochastic processes
Online Access:View this record in EBSCOhost
Summary:Recently, time-driven activity-based costing ( ABC) has been developed as a cost modelling technique in which transaction times (that is, times required for particular occurrences of an activity) are calculated using time equations. This paper develops a model of the error structures in time-driven ABC and examines the impact of adding terms to time equations on the accuracy of estimated transaction times. The results provide some fundamental insights into the balancing of errors when refining time equations and lead to some general recommendations that may be followed in the design process of a time-driven ABC system to enhance the accuracy of times calculated by means of time equations.