Discuss the factors affecting the selection of cost drivers
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Explanation:
A cost driver is a factor that directly causes variance in cost, and its determines the overall cost of any work.
Factors affecting the selection of cost drivers include;
- Utility consumption rates
- Labour rates and availabity
- Production efficiency
- Waste and low quality work
- Re-working
It is important to take care of all such factors in order to get control of cost drivers and to optimize them
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The factors that affect the selection of cost drivers are the, changes in production process, inputs needed for production, changes in quantity of goods, human resources, product mix and more
Explanation:
- The cost driver is effective in resulting in a change in cost for a certain process or activity. It could mean change in the overheads for the production of a certain good. These cost drivers are very effective in process of cost factor analysis for the process of production
- The factors that affect the cost drivers relate to changes in production process, quantity needed, number of people required and more. The factors affecting the selection of cost drivers are needed for evaluating the total overhead costs for the unit of production.
- The cost factor analysis is necessary for reducing the cost of an activity and also for minimizing the various other overhead costs involved in production. It helps in removing wastage from the production process since they lead to an increase in the costs
To know more about factors of production
Is entrepreneur a active factor of production or passive factor of production...??
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