Time-driven Activity-based costing, the newest technique in cost price calculation, is explained during a case study that is based on a real business context.

The company used in the case study is Sanac, a distributor of pesticides, fertilizers and other garden products. During the year the number of orders was very volatile because Sanac was situated in a seasonal business, therefore they had a large problem with the calculation of the correct cost price of their products. Neither a traditional model for cost price calculation nor activity-based costing was a solution for the company. Finally they opt for a time-driven activity based costing model, taken into account both the practical capacity of machines and employees and time spent on a certain activity.

The students dealing with the case study are hired as a business consultant to decide about the appropriate costing method.  Their task is to decide which system the company should implement, given the desire of the company to calculate profitability at the order and the customer level.

This case study is the first case to our knowledge that explains the technique of time-driven activity-based costing to students.

Download the paper here.

For the slides related to the paper, we refer to: Slideshare: "Sanac Inc: from ABC to Time-driven ABC: an instructional case"