Cost Driver Analysis Example Today

= $300,000 / 15,000 moves = $20 per move Step 5: Trace Costs to Products Using Actual Driver Consumption Now we collect data on how many driver units each product line consumes annually.

These costs are traced directly using actual resource consumption records (e.g., maintenance logs, payroll records for setup workers, move tickets). We now select drivers that link each activity’s cost to the two product lines. cost driver analysis example

| Activity | Resource Cost Driver | Total Annual Cost | |----------|----------------------|-------------------| | Machine operation | Machine hours | $1,000,000 | | Setup | Setup hours | $600,000 | | Quality inspection | Inspection hours | $500,000 | | Material handling | Number of material moves | $300,000 | | | | $2,400,000 | = $300,000 / 15,000 moves = $20 per

= $500,000 / 2,500 inspections = $200 per inspection | Activity | Resource Cost Driver | Total

= $1,000,000 / 50,000 machine hours = $20 per machine hour

| Activity Driver | Standard Chairs | Custom Tables | Total | |----------------|----------------|---------------|-------| | Machine hours | 40,000 | 10,000 | 50,000 | | Number of setups | 200 | 1,000 | 1,200 | | Number of inspections | 500 | 2,000 | 2,500 | | Number of moves | 5,000 | 10,000 | 15,000 |