Fuzzy Time-Driven Activity-Eased Costing

Activity-Based Costing (ABC) method is a well-known costing/accounting system. It is an alternative to traditional accounting systems in which business overheads are allocated in proportion to activity's direct costs. Kaplan and Anderson proposed the second generation of the ABC system, called "time-driven activity-based costing" (TDABC), which seeks to resolve some of its drawbacks. The TDABC approach is mainly based on the time drivers spent on cost pools; however, TDABC poses some difficulties in calculations of the assigned costs. Unavailability of accurate and reliable time drivers, variety of time drivers, difficulties of collecting and updating data through calculation procedure, and huge volume of data are some examples of the difficulties. In this article, via utilizing the triangular fuzzy number (TFN), a novel mechanism for the TDABC system is proposed. We employ fuzzy logic to estimate inputs required for TDABC, namely, the required time to perform each activity and practical capacity. Our proposed approach highlights deviations caused by deterministic estimates in TDBAC and makes our estimates more realistic. In addition, sensitivity analysis can be conducted with our proposed approach. Finally, all plausible conditions ranging from the worst case to the best case can be considered; therefore, insightful and appropriate managerial decisions can be made.