A model is a change in the cost of warehousing or a change in the level of production. Assuming that the cost of warehousing is high, this will likewise increase the expenses incurred for product manufacturing or offering types of assistance.Īn activity cost driver, otherwise called a causal factor, makes the cost of an activity increase or decline. On the off chance that the cost of labor is high, this will increase the cost of delivering all company products or services. For instance, direct labor hours are a driver of most activities in product manufacturing. There might be various cost drivers associated with an activity. How Activity Cost Drivers WorkĪ cost driver directly impacts a business activity. Cost drivers are essential in ABC, a branch of managerial accounting that designates the indirect costs, or overheads, of an activity. In activity-based costing (ABC), an activity cost driver impacts the costs of labor, maintenance, or other variable costs. A cost driver influences the cost of specific business activities. Business Corporate Finance and Accounting Accounting What Is an Activity Cost Driver?Īn activity cost driver is an accounting term.
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