Cost activity drivers

Indian Pricing. Ingot. Billet. An activity driver is something that influences the cost of an operation. Activity drivers are used to allocate the costs in secondary cost pools to primary cost pools, as well as to allocate the costs in primary cost pools to cost objects.  · Activity cost drivers are used in activity-based costing, and they give a more accurate determination of the true cost of business activity by considering the indirect expenses.

The cost driver can be anything in the pool that causes the cost of the activities to increase or decrease. Example. An example of an activity cost driver in a manufacturing plant is the number of orders that must be produced. Take the Ford plant for example. Everyday thousands of cars are ordered into the production line by management. Scrap HMS. Old Scrap. Sponge Iron. The cost driver is that variable or factor which has an effect and causes the relationship with the total cost. This is the cause, and the cost incurred is the effect of it. Its analysis means identifying all the possible cost drivers for a particular type of activity or cost etc. and explains their cause and effect relationship with the event.

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