Executional cost drivers facilitate operational decision making by focusing on short term effects (workforce involvement, design of the production process, and supplier relationships are considered in an attempt to reduce costs.
A cost driver triggers a change in the of an activity. The concept is most commonly used to assign costs to the number of produced units. It can also be used in analysis to determine the causes of overhead, which can be used to minimize overhead costs. Examples of cost drivers are as follows:. hours worked.
Number of customer contacts. Number of issued. Number of machine hours used. Number of product returns from customers If a business is only concerned with following the minimum accounting requirements to allocate overhead to produced goods, then just a single cost driver will be used.
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