| Panel A: Activity-based Costing |
| Step1: Identify the different overhead activities, |
| Step2: Assign the overhead costs to the different activities using a resource driver, |
| Step3: Identify the activity driver for each activity, |
| Step4: Determine the activity driver rate by dividing the total activity costs by the practical volume of the activity driver, |
| Step5: Multiply the activity driver rate by the activity driver consumption to trace costs to orders, products or Customers. |
| Panel B: Time-Driven Activity-based Costing |
| Step1: Identify the various resource groups (departments), |
| Step2: Estimate the total cost of each resource group, |
| Step3: Estimate the practical capacity of each resource group (e.g., available working hours, excluding vacation, meeting and training hours), |
| Step4: Calculate a capacity cost rate (CCR) of each resource group by dividing the total cost of the resource group by the practical capacity, |
| Step5: Determine the required time for each event of an activity using a time equation, |
| Step6: Multiply the capacity cost rate (CCR) of each resource group by the time required to perform the activity. |
