THE KEY ASPECTS OF THE BUILDING AND APPLICATION OF TIME EQUATIONS IN COST CALCULATION

In addition to the capacity cost rate, the key parameter of Time-Driven Activity Based Costing – the TDABC is the time required for the realization of each business activity. In accordance with the TDABC methodology, the above-mentioned time is calculated by using time equations. Therefore, the total time required for the realization of a certain business activity is obtained by adding a normal (standard) time to the additional time required for performing modified forms of one and the same activity. The aim of this paper is to analyze the role and importance as well as various aspects of the building of time equations from the perspective of the organizational and methodological preparation for the realization and functioning of the TDABC. The research results show that the application of time equations leads to the increased accuracy of the calculation of costs and a product cost, reduces the complexity of the organizational and methodological preparation for the implementation and functioning of the TDABC system, i.e. enables the realization of a more effective and efficient costs calculation.

 

Keywords: calculation of costs, Time-Driven Activity Based Costing, capacity cost rate, time equations, time drivers