Five myths about time-driven activity-based costing
The straight facts about traditional and time-driven costing methodologies
After decades of proven success, activity-based costing (ABC) has come under fire from its earliest and most active proponents.

Robert S. Kaplan and others are promoting a “new, innovative, time-driven methodology” that presumably “delivers great improvements to the older systems of 15 years ago.”1 Companies are replacing their current costing solutions to try to get strategic information faster and with less maintenance.
Is this approach really new and revolutionary? Does it deliver on its promise?
Time-driven ABC vs. traditional ABC
Traditional ABC is a “push” model of costing. You start with total expenses spent on various types of resources, such as salaries or supplies, and then determine what percentage of each resource is associated with each product or service. Then you apply that ratio to the total cost, which generates cost allocations for every product.

In contrast, time-driven ABC is a “pull” model of costing. You start with estimates of two parameters: units of time required to perform an activity and the cost per unit of time. You then multiply this information by the quantity of the product.

For resources not measured by units of time, the costing methodology can accept other measures. For instance, the capacity of a distribution center could be measured by available area and priced at cost per cubic meter. The capacity of a computer server would be measured by available gigabytes and priced at cost per gigabyte.

So, “push ABC” computes actual activity costs and aggregates them into the outputs, such as products, that consume those activities. “Pull ABC” computes activity costs at standard rates and leaves a “leftover efficiency” and/or unused capacity cost variance. But both ABC methods account for the same