Duration Based Costing: New Cost Accounting Methodology

Duration Based Costing (DBC) is a cost accounting technique that aims to assign costs based on the duration of activities rather than the volume of output produced. DBC is particularly useful in service-oriented businesses where output is difficult to measure or quantify. DBC calculates the cost per unit of time spent on an activity, and this cost is then assigned to each product or service based on the time spent on it. One of the key benefits of DBC is that it provides a more accurate picture of the true cost of producing a product or service. This is because it takes into account the amount of time spent on each activity, rather than just the volume of output produced. This can help businesses make better-informed decisions about pricing, product mix, and resource allocation.