Cost and Cost Driver

1. Choose a cost in your organization (or personal life) — choose something specific.
2. Next, identify what drives that cost. Keep in mind that the cost driver is something that can be counted!

For instance, here’s a couple of examples:

1.  gasoline cost

2.  the number of miles I drive to and from clients’ offices (I can count the number of miles)

1.  At home, electricity cost

2.  the number of people-days at my house (I can count the number of people on each day).  Some months everyone is gone (low bill), and other times many houseguests makes for a high electric bill.

What are your examples?

#2 Cost Drivers (Professor)

In previous weeks, there was mention of “cost drivers”.  This week, the concept of “cost drivers” becomes even more prominent.   What are cost drivers?  Why are cost drivers important in Activity Based Costing?

#3 Applying ABC Concepts (Professor)

Watch this quick video about the importance of Activity Based Costing:  ABC video:  https://www.youtube.com/watch?v=ivlI0HvUPQo

Can you identify any situations in which your organization would benefit from using ABC concepts?

Chapter7