The cost is allocated based on the driver’s activity completed in that particular period. What are cost drivers in business strategy?Ī cost driver is a unit that derives the expenses and sets a basis on which a particular cost is to be allocated between the different departments. The ABC system of cost accounting is based on activities, which are considered any event, unit of work, or task with a specific goal. What is ABC costing method?Īctivity-based costing (ABC) is a method of assigning overhead and indirect costs-such as salaries and utilities-to products and services. ![]() ![]() ![]() Which of the following is an example of an activity cost driver?Įxamples of activity cost drivers are direct labor hours, square footage used, the number of customer change orders, and the number of machine setups required.
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