Comparison of activity-based costing and time-based activity-based costing applications in a dairy product business

Costing systems help business managers to understand the current situation of their business and deciding on proper strategies by obtaining detailed information. Thanks to the changes in technology, economy and social structure; costing structures have also changed and thus current approaches have emerged in costing systems. Activity based-costing system and time-driven activity-based costing system, which are among the new approaches, are two of the newly emerged methods. Activity-based costing system was introduced and developed due to the deficiencies and inadequacies of traditional costing systems. Activity based costing system is an information system that obtains the necessary information on the financial and nonfinancial data of operating activities, resources, cost objects and cost drivers and success criterion of the activities and then processes and converts them into information. In activity based costing systems, ideal capacity is used. Since the business managers cannot designate the ideal capacity quantity that is not utilized, they prevented this approach from being an effective, contemporary and current management tool. As a result, time driven activity based costing system emerged in order to bring solutions to the problems that rose to the surface. Time driven activity-based costing system is an improved, updated, complete and simplified version of the activity based costing system. Time driven activity based costing system both focuses on the activities and takes the time factor into consideration. Since practical capacity is used in time driven activity-based costing systems, it lets the unutilized capacity to be calculated and provides more accurate costing information by not distributing the unutilized capacity costs. This study was conducted in order to investigate the applicability of activity based costing and time driven activity based costing systems in production enterprises in Turkey. Within the scope of the research, the applicability of activity based costing systems and time-driven activity based costing systems in a dairy products production enterprise was revealed.