TDABC vs Traditional ABC
How time-driven ABC differs from traditional ABC – surveys vs time equations, and when each one fits. A practical comparison.
TDABC vs traditional ABC: the full comparison
Both methods share the same goal – trace overhead to the activities and then to the products and customers that cause it. They part ways on one question: how do you know how much time each activity takes? Traditional ABC asks people, in surveys and interviews. TDABC calculates it, with a time equation. Everything else – the cost, the speed, the shelf life of the model – follows from that single difference.
| Dimension | Traditional ABC | TDABC |
|---|---|---|
| Time data | Employee surveys & interviews | Time equations from operational data |
| Setup effort | High – repeated data gathering | Moderate – mostly existing ERP data |
| Scale | Tens of activities | Thousands of products & customers |
| Refresh | Re-survey – rarely done | Monthly from ERP / SAF-T |
| Unused capacity | Hidden | Shown explicitly |
| Best fit | Small, stable operations | Most companies with variety |
The verdict is not that ABC was wrong – it was right about activities and impractical about data. TDABC keeps the insight and drops the burden.
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What time-driven activity-based costing (TDABC) is
TDABC is the rare costing method simple enough to run and accurate enough to trust. It answers every cost question with the same two numbers: what does a minute of this resource cost, and how many minutes does the work take? Multiply them and you have the cost of any order, customer or product. There are no employee surveys and no timesheets – the two things that made traditional ABC collapse.
That simplicity is what lets a TDABC model cover an entire business without an army of analysts. The first number, the capacity cost rate, comes from payroll divided by practical capacity. The second, the time equation, estimates minutes from the characteristics of the work – order size, complexity, rush. Both are refreshed from monthly ERP exports, so the model stays live rather than becoming a one-off study. The full method, history and worked examples are in our TDABC guide.
What time equations are in TDABC
The time equation is the small idea that makes the whole method work. Instead of asking staff how they split their time, you write a formula that predicts the minutes a task takes from facts already in your data. Start with the standard case, then add time for each thing that makes a transaction harder. The equation does the rest, transaction by transaction, at any volume.
Each term has a job. The base time is the standard case. Each driver – line count, weight, rush, customer type – adds or removes minutes. You do not need many: two or three drivers usually explain most of the variation, and you add more only where the money justifies it. Base times come from system timestamps and a few hours of observation, never from timesheets. The result is a model that is fast to build and honest about its own precision.