Examples of cost drivers in manufacturing

 · Complex Cost-Drivers in Operational Context. The nature of product design means that virtually every cost driver is densely interwoven with broader design concerns, from form, to functionality, to manufacturability. Even a seemingly simple change can create a cascade of secondary cost-fluctuations throughout the www.doorway.ruted Reading Time: 6 mins.  · If a business is only concerned with following the minimum accounting requirements to allocate overhead to produced goods, then just a single cost driver should be used. Examples of Cost Drivers Examples of cost drivers are direct labor hours worked, the number of customer contacts made, the number of engineering change orders issued, the number of machine hours used, Estimated Reading Time: 30 secs. For example, machine maintenance and repair is a major cost driver for manufacturing firms, while service firms have stationary and Internet connections as price drivers. To unlock this lesson you.

Based on the above cost drivers, the company’s cost can be allocated to the products as follows: Product A Set-up + Machine Maintenance + Customer Service = ($20, + $40,+ $60,) = $, Product B Set-up + Machine Maintenance + Customer Service = ($30,+ $50,+ $60,) = $, Product C. A cost driver is a unit of activity that causes a company to incur costs. Some examples are: Direct labor ; Machine use ; Returns ; Handling and storage. Number of Labor Hours. Number of Deliveries. Number of Calls Taken. Number of Rides. These are not just the only types, but there may be many other types of cost drivers based on the type of activity being performed and the basis of division of that activity in terms of cost to be allocated to various departments.

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