What is the activity driver?
Activity driver, also called driver's driver, is any event or activity that has a significant impact on the total product costs. This is used to help businesses to determine how much every product should cost to return its money back and reap profits. Common factors of the driver's activity include the retribution of employees, machine clocks and resource costs. There are also unexplored costs, but some analysts say that these costs should be added to the mix. Looking at activities, analysts can help reduce costs and therefore make the product cheaper.
to help assign a fair price of the product - for the customer and business - analysts look at the driver's activities to find out the product's management costs. Each activity driver is then placed in its own cost object or in separate measurement of each cost. Looking at the driver, the analyst must determine both the frequency and the hourly cost of activity.
every product will have at leastOne activity controller. Joint drivers are the cost of hiring employees to create a product; Hours used by the machine, causing maintenance; a lot of resources and time spent by increasing resources; and transport. The more activity drivers and the longer each driver has to do, the higher the price of the product.
Other drivers' costs are considered to be unexplained or have no noticeable effect on the price of the product. This includes the salary of executives and the payout of anyone else who does not directly participate in the product. Even if they do not apply to the driver's assignment, the costs must still be overcome to make a profit. Therefore, many analysts also estimate these factors to ensure a profitable price.
, together with the knowledge of the driver's contribution to price, managers and analysts, seeks to find ways to reduce the price of ssing quality or quantity. For example, if it is to produce a productIndeed, fewer employees, or if the company can get resources at a cheaper price from another supplier, it will reduce the activity driver's contribution. At this point, the company will either reduce the price of the product or reap further profit.
If the product cannot meet the cost of the driver's activity, the company will find a way to reduce its price or stop it. Conversely, if the product is doing exceptionally well, the company will assign more resources to ensure that the product meets consumer demand. To help control the cost of analyzing drivers cost, software is usually used, so analysts can work faster.