Cost driver analysis in activity-based costing (2)

Factors to consider when selecting cost drivers

Cost drivers are allocation standards, which have an important impact on the accuracy and relevance of cost information. They are the basis for cost analysis. Through cost drivers Establishing the causal relationship of cost analysis, therefore the determination of cost drivers is an important part of the implementation of activity-based costing. When selecting cost drivers, the following factors need to be considered:

1. Degree of correlation: During the allocation process, it is assumed that the cost of the allocation source is linearly related to the quantity of the cost driver. In practice, there are multiple cost drivers, and the cost driver whose number is linearly related to the total cost of the distribution source is the most appropriate cost driver, which can ensure the accuracy of cost information.

2. Implementation costs: An allocation requires the collection of cost driver data for each allocation target. If the data cannot be collected, the allocation cannot be made. When determining cost drivers, the cost of collecting cost driver data must be considered to ensure that relevant data are easily accessible. If data collection costs are too great, it may make activity-based costing unfeasible.

3. Behavior orientation: Different cost drivers have different allocation results. Different cost allocation results and management decisions (such as bonuses) based on the allocation results will have a guiding effect on the behavior of the organization and employees. Therefore, the behavior-guiding role of cost drivers must be carefully analyzed. Enterprises can use the behavior-oriented function of cost drivers to guide employees' behavior in a direction that is conducive to cost reduction.

Cost driver classification

Kaplan proposed three different natures of cost drivers: execution cost drivers, time cost drivers, and actual cost drivers. Execution cost drivers usually use the number of executions as the cost driver; time cost drivers use time to measure cost consumption, and labor hours in traditional costs are typical time drivers; actual cost drivers are based on the actual consumption of allocated sources. For allocation, this cost driver is an error-free cost driver. In sequence, the allocation accuracy of the three cost drivers gradually increases, while the implementation costs gradually increase.

Cost drivers can be divided into single cost drivers and composite cost drivers: single cost drivers refer to allocation based on one cost driver, while composite cost drivers comprehensively consider multiple cost drivers according to certain rules to determine new allocation standards. . In the traditional cost method, there are already examples of single cost drivers and composite cost drivers: if allocated according to labor hours, then labor hours are a single cost driver; if allocated according to equipment hours, the labor hours need to be multiplied by the equipment hours of each equipment Coefficient, the allocation standard at this time is actually a composite cost driver, which comprehensively considers two factors: man-hours and equipment.

Cost drivers can also be divided into quantity-type cost drivers and specific-heavy-weight cost drivers: quantity-type cost drivers are allocated according to the number of cost drivers of each allocation target, and specific-heavy-type cost drivers do not collect the number of drivers for each allocation target. Directly set the proportion of each allocation target in the allocation to allocate costs. The advantage is: when production is stable or under certain specific circumstances, the proportion of each distribution target in the total cost is fixed and rarely changes, which simplifies distribution and is conducive to cost analysis, and also reduces the implementation cost of operating costs. A special way to use heavy drivers is to distribute them evenly according to the number of distribution targets. For distributions that support activity costs or the total cost of distribution sources are small, this more simplified distribution method can be adopted to reduce implementation costs.

Cost driver sharing

If two or more allocation processes have the same cost driver and allocation target, using cost driver quantity sharing can reduce the number of driver collections. . Figure 3 illustrates the comparison between cost driver quantity sharing and non-sharing. In the case of cost driver quantity sharing, only two driver data need to be collected. In the case of cost driver quantity sharing, it is not necessary to collect data. , then four cost driver data need to be collected. ***Sharing cost drivers can reduce data collection, increase implementation success rate, and reduce implementation costs. Where practical, the design of the activity-based costing system should use cost driver sharing as much as possible.