What is the cost driver?
Cost drivers are factors or events that have a type of direct or indirect impact on the cost related to specific activities. While it is possible to consider the effect of each cost factor individually, ABC access or activity -based costs is to consider all relevant factors or events associated with activity and determine their cumulative effect. Within the process of identifying relevant factors, each cost driver is categorized as a source control or an activity controller.
The cost controller that is identified as an activity driver is the idea of consider any factors that have some type of indirect impact on the cost of activity. For example, the cost of maintenance of equipment produced by a specific product would be considered indirect costs, while the driver was connected to the number of hours operated by the machinery to produce this product. Similarly, the costs associated with quality inspection would be indirect COST, with the cost driver that J JE Number of hours needed for proper control of units produced in a given period of time.
When the cost controller is identified as a source control, it focuses on sources that are consumed as part of the activity. This means that the cost of raw materials or work used to create products would be considered a cost driver, as the price paid for these materials and wages paid to workers have a direct impact on the investment in each unit produced. The driver of this type is very important because it serves as part of the basic data used to determine the retail price of each unit sold.
Identification of the cost driver requires a closely examining the cost of product production and the effect that the driver has at these costs. A classic example can be seen in the operation of the delivery service. The company provides a sershair delivery of goods to various places on behalf of its clients. It is associated with this activityAnd a number of expenses.
The Company must pay for the maintenance of the delivery vehicle, providing wages for drivers, buying fuel for truck and performing periodic maintenance on a truck. In addition, it is necessary to continue the service of the delivery company on the truck and on the delivered items. The rate of consumption for many of these expenditure is based on the number of supplies made in the given period. This means that in this scenario it is likely that the driver in this scenario is the number of deliveries that are made using a truck during each working day.