What are cost drivers in ABC costing?
Accordingly, what is a cost driver give three examples?
Examples of cost drivers are as follows: Direct labor hours worked. Number of customer contacts. Number of engineering change orders issued. Number of machine hours used.
Subsequently, question is, what is cost pool in ABC costing? A cost pool is a grouping of individual costs, typically by department or service center. Cost pools are commonly used for the allocation of factory overhead to units of production, as required by several accounting frameworks. They are also used in activity-based costing to allocate costs to activities.
Furthermore, what are cost drivers in accounting?
cost driver is any factor which causes a change in the cost of an activity. — Chartered Institute of Management Accountants. "Cost drivers are the structural determinants of the cost of an activity, reflecting any linkages or interrelationships that affect it".
How is cost driver calculated?
Find the total cost for the activity in your given information. For instance, you would use the total cost to produce all of the widgets. Divide the activity cost by the volume to find the cost driver rate. For example, if you made 100 widgets for a cost of $3,000: $3,000/100 = $30 per widget.