A time equation expresses the time required to perform an activity as a function of its characteristics: T = 5 + 3·[if_rush_order] + 2·[number_of_lines]. This allows a single equation to capture dozens of process variants without creating separate cost pools for each.

A first TDABC model typically has 10-30 cost pools covering the major departments or functions. Granularity should reflect decision relevance – more detail where cost complexity is highest.

A focused TDABC implementation with a clear scope typically takes 6-12 weeks from kick-off to first results. CostCTRL is designed to accelerate this process significantly.

TDABC was originally developed for manufacturing but has proven especially powerful in service businesses – banking, professional services, healthcare, logistics – where overhead is high and cost complexity is significant.

Practical capacity is the time a resource is actually available for productive work, after breaks, training, maintenance and idle time – typically around 80-85% of theoretical capacity. It matters because the capacity cost rate is total cost divided by practical capacity, not by paid hours. Dividing by practical capacity means unused capacity shows up as a separate cost rather than being hidden in product costs, which is one of TDABC’s most useful outputs. Our capacity utilisation page explains how to set and use it.

The capacity cost rate is the total cost of a resource group divided by its practical capacity in minutes. Add up everything that resource costs – salaries, social charges, supervision, space, equipment – then divide by the minutes it is genuinely available to work, usually 80-85% of theoretical hours. The result is a cost per minute that every time equation multiplies against. Using practical rather than theoretical capacity is what surfaces the cost of unused capacity instead of burying it in unit costs.