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Some examples of indirect costs and their drivers are: indirect costs for maintenance, with the possible driver of this cost being the number of machine hours; or the indirect cost of handling raw-material cost, which may be driven by the number of orders received; or inspection costs that are driven by the number of inspections or the hours of ...
The cost driver is a factor that creates or drives the cost of the activity. For example, the cost of the activity of bank tellers can be ascribed to each product by measuring how long each product's transactions (cost driver) take at the counter and then by measuring the number of each type of transaction.
In order to conduct the cost breakdown analysis, the starting point is to examine the various cost drivers of the service or product that is being analyzed. When itemizing the costs of transportation, one can come up with a simplified list of six cost drivers, namely: Personnel (e.g. driver) Motor fuel (diesel / gasoline) Tires; Maintenance; Tolls
Standard Costing is a technique of Cost Accounting to compare the actual costs with standard costs (that are pre-defined) with the help of Variance Analysis. It is used to understand the variations of product costs in manufacturing. [6] Standard costing allocates fixed costs incurred in an accounting period to the goods produced during that period.
Cost pools is an accounting term that refers to groups of accounts serving to express the cost of goods and service allocatable within a business or manufacturing organization. [1] The principle behind the pool is to correlate direct and indirect costs with a specified cost driver, so to find out the total sum of expenses related to the ...
A cost object is a term used primarily in cost accounting to describe something to which costs are assigned. [1] Common examples of cost objects are product lines, geographic territories, customers, departments or anything else for which management would like to quantify cost. [2] The use of cost objects is common within activity based costing ...
Costs of specific goods acquired or made are added to a pool of costs for the type of goods. Under this system, the business may maintain costs under FIFO but track an offset in the form of a LIFO reserve. Such reserve (an asset or contra-asset) represents the difference in cost of inventory under the FIFO and LIFO assumptions.
The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.. The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical ...