Drivers still Right?

Activity Based Costing
Knowledge Center

Best Practices

Sign up

Manwel

Drivers still Right?

ABC is one of the most recent developed evolutions in costing. It has a big impact in allocating the cost to the right object... But still the question is: to what extent are the drivers right and effective? Does ABC require ongoing update of drivers?

  Maggie
 

Activity Based Costing Limitation

Cost drivers are not easy to define and obtain.

  Rajendra Patil
Consultant, India
 

Definition of Drivers

Generally people use the term 'accuracy' for both the ‘driver’ and the ‘driver data’ interchangeably. It may not be the case here though.
I would suggest that the definition of resource and activity drivers (ref. cam-i cross) must be very accurate. The corresponding data does not have to be so accurate initially. This accuracy of the data can be increased in the future (if required). But if the driver definition is inaccurate, then even if the driver data is accurate, the calculations would still be useless..
A cost driver (by cam-i cross definition) is a reason for the activity to have costs. For example:
Activity - assemble product
Cost driver: - # of parts to assemble
- design of the product
- quality of the parts received
The cost of the activity ‘assemble product’ would change if # of parts change or design change or the quality of the components change.

  Debasish Basu
Accountant
 

Management Accounting

Realistic approach of practical utility. (...)

Start a new forum topic

 

More on Activity Based Costing
Summary
Forum
ABC in service companies such as airlines?
Degree of Detail in ABC
ABC Implementation
ABC and Decision making
Time-driven ABC (TDABC)
Activity Based Management (ABM)
ABC or TOC? The Differences between ABC and the Theory of Constraints
Comparison ABC, Time-Driven-ABC and Lean Accounting
ABC Costing in Make to Order of Repetive Manufacturing
Over Recovery / Under Recovery Level
🔥What is Process Costing?
ABC in the Federal Environment
An ABC Initiative is Only as Effective as the Software That Supports It
Organizational Issues when Introducing ABC
What is Job Order Costing?
How to Derive Overhead Cost from a P&L?
Best Practices
Limitations and Advantages of ABC for Budgeting
Limitations ABC monitoring operations
ABC in an Advertising Firm?
The Cost of Non-value-added Activities
ABC: reduce non value adding activities?
Consequences of ABC Analysis
Capacity Minutes and Industry Norms
Drivers still Right?
ABC Helps Companies Survive Recession
Traditional Costing versus ABC
Conditional Resources in ABC
The Process of ABC (ABC) simplified
ABC (ABC)
Overhead Costing - Food Manufacturing
Calculating the Most Profitable Way of Manufacturing a Product
Recommended ABC Software
Special Interest Group

Do you have a keen interest in Activity Based Costing? Become our SIG Leader

Activity Based Costing
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2021 12manage - The Executive Fast Track. V15.8 - Last updated: 1-8-2021. All names ™ of their owners.