Woolworths Limited is one of the largest organizations established that operated mainly in Australia and New Zealand. The organization is associated with the retail industry and it considers time-driven activity-based costing in order to develop its financial statements. The TDABC is somewhat different from the traditional costing system and activity-based costing. The method is helpful to reduce the number of difficulties to create financial statements. The cash flow statement and tax expense can be made more effective by using it. The report is going to focus on the ways Woolworths can use TDABC and its suitability with the organization.
Description of Woolworths Limited
Woolworths Limited was established in 1924 and its headquarter is situated in Bella Vista, New South Wales, Australia. It is the second-largest organization in Australia based on its revenue generation after Wesfarmers. It is also the second-largest organization by revenue in New Zealand. The number of employees associated with this organization is more than 21000. Apart from this, in Australia, Woolworths Limited is the largest liquor retailer, gaming poker machine operator, and hotel owner. In the year of 2008, the organization became the 19th largest retailer in the world. However, the organization is not associated with the Woolworth brands in the United States or in the United Kingdom. In the financial year 2016, the organization experienced a loss of $1.235 billion which is the largest compared to the last 20 financial reports (“Woolworths Group: Quality Brands and Trusted Retailing”, 2018). The organization has different divisions related to its products such as supermarket, petrol, liquor, general merchandise, home improvement, hotels, and gambling. Woolworths Limited is owned 75 percent of the Australian Leisure & Hospitality Group which operates more than 12650 poker machines throughout Australia by doing so, the organization became the largest poker machine operator in Australia. Woolworths Limited earns approximately $1.2 billion in revenue by operating poker machines. The hotels associated with Woolworths Limited created a loyalty card scheme for the customers in order to provide incentives to frequent gamblers and arrange then free food and drinks. In the current scenario, the organization is focused on implementing TDABC in the organization in order to make the financial statement more efficient and reduce any drawbacks in it.
Description of TDABC and its features
Time-Driven Activity-Based Costing or TDABC is the cost accounting system that is considered by many organizations in the present scenario. The organization can get different facilities while using this cost accounting system in order to create financial statements and other financial calculations.
The TDABC model is simpler than the traditional model used in the calculation of cost accounting by different organizations. The equivalence method is used in this procs that are established in the “resource group”, which focuses on the time required to perform the activities. An organization can create its financial statements by conducting different financial calculations easily and it consumes less time compared to the traditional cost accounting system. The TDABC is the strategic model of cost and profitability which is faster, inexpensive, and can be created with more ease (Öker & Adıgüzel, (2016).
Usage of TDABC in an organization can enable the integration of detailed transactional data. That information can be available in the ERP system and customer relationship management system of an organization. That information is essential for an organization to create its financial statement more accurately. Usage of that information is emphasized by using TDABC and an organization can associate those while calculating financial statements. The TDABC model is based on transactions of money specific to the orders made by an individual. The model can be used to associate the orders of the customers, suppliers, distributors, and other stakeholders in order to make calculations to make financial statements.
An organization can get different opportunities while using this model for its financial calculations. The efficiencies of the processes associated with the organization can be measured more efficiently. Apart from this, an organization can find out opportunities related to its capacity management by using TDABC efficiently. That information can be used to create financial statements more accurately. The TDABC is helpful to gather that information from different sources of the organization easily that enable the accounting calculation moe structured and effective.
It the TDABCishelpful for the organizations to forecast the demand of the resources for future usage. The correct forecast of the resources can be helpful for the organization to enhance the level of productivity (McLaughlin et al. 2014). Different resources such as human resources, technological resources, raw materials, and more can be forecasted by using this method and an organization can make its budget according to its demand of the resources for future usage. Apart from this, the right budget can be helpful for the organization to estimate the requirements for different activities related to the business operations. The correct forecast is helpful in this process and an organization can make its budgets effectively by focusing on different small requirements of the business.
The TDABC model can be easily scalable by the organizations and for this reason, this model can be used in different organizations in the present scenario. A number of business organizations need to go through complex financial calculations in order to create their financial statement every year. The larger organization especially those established in different countries needs to conduct a range of financial calculations every financial year. Those organizations can use this method of financial calculation by using scalable applications and database technologies. Using those is helpful for the organization to reduce the complexity related to the financial calculation and a largerorgansiationc and make its financial statements more easily while considering using the TDABC model (Akhavan, Ward & Bozic, 2016).
The model is inexpensive and easy to update, for this reason, the organization needs to face lesser difficulties in order to work using this model. Apart from this, the cost related to updating this method is lower and an organization does not need to face difficulty with it. The TDABC model is used to deal with complexity related to the customers, segments, processes, products, and more. The financial calculations can be done more easily which is helpful for its growth.
The different ways TDABC is different from Activity-Based Costing and traditional costing systems
A TDABC can be said to be different from the other activity-based costing and traditional costing system as this may be effective for the company to take care of the works which may be suitable for the company to work and maintain the works of their business in a different manner. Coming to the study, activity-based costing is supposed to be said as the ways through which a company works and make it effective for the customers to take care of the work and all the cost of the company are due to the activity of the virtue of which it works and maintains its business (Thaker, Frank & Feeley, 2015). On the other hand, the traditional costing system is the ways through which all the volume of cost drivers is needed to be considered and as the way, the item is being produced and in this way, it can be said to be as the ways through which it may need to be done as per the needs of the company and this may try to be as per the works through which Woolworths would need to deal with the works effectively. Time-Driven Activity-based costing is said to be the way through which the ways a company would be working and working on the activities effectively.
Some of the ways through which it may be effective for the company to work are the ways through which a company would need to take care of the activities that are being done in the company and in that way the time is being considered under which it may be effective for the company to make a way into the costing part of the company and then try to work on the format effectively. It may be considered to be a simpler way of conducting the costing process as all the costs that a company puts in order to work effectively into the company, TDABC provides an effective time-driven way through which a specific time period is being introduced that helps the company to take care of the works in an effective manner (Kaplan, 2014). Distinguishing between the three costing ways the following ways:
Activity-based costing Traditional costing system TDABC
It is observed under the activities that may lead the company to new ways of working. It is considered to be the ways through which the traditional ways of working are being done and taken care of effectively. It is mostly considered to be time driven and on the virtue of which the works that are being done are as per the effective activity which the company works on and take the works as per the needs.