What-If Analysis and Activity-Based Budgeting
Forecasting Resource Demands

Excerpted from

Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profits
By

Robert S. Kaplan, Steven R. Anderson

Harvard Business Press Boston, Massachusetts

ISBN-13: 978-1-4221-2227-3

2227BC

Copyright 2008 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America This chapter was originally published as chapter 5 of Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profits, copyright 2007 Harvard Business School Publishing Corporation. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to permissions@harvardbusiness.org, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. You can purchase Harvard Business Press books at booksellers worldwide.You can order Harvard Business Press books and book chapters online at www.harvardbusiness.org/press, or by calling 888-500-1016 or, outside the U.S. and Canada, 617-783-7410.

chapter five

WHAT-IF ANALYSIS AND ACTIVITY-BASED BUDGETING

Forecasting Resource Demands the full benefits from Time-Driven ABC only if they adjust the supply of their resources to the demands from products and customers. Companies can improve processes, rationalize their product mix, and modify customer ordering and delivery patterns to eliminate transactions that make excessive demands on resources. None of these actions, however, produce profit improvements by themselves. The actions free up considerable amounts of capacity throughout the enterprise.