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Cost Drivers - Essay Example

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Summary
Activities are cost objectives that cause costs in producing goods and services as well as providing the support services that are required for that production. Resources on the other hand are required to perform the activities (Hansen et al. 2011).
Activities for the division…
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Cost Drivers
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"Cost Drivers"

Download file to see previous pages Finally, cost drivers includes hours of time, number of employees, number of setups, number of wheel, number of enquiries, number of products produced, number of machines maintained, and number of hours of supervision.
Cost behaviour normally relate to various activities as well as the consumption of resources ((Hansen et al. 2009). Such resources have costs which are either fixed and do not vary directly with resource usage in the short run or variable and varies in direct proportion to the resource consumption. Activities usually consume resources and the costs of such resources often follow various behavioural patterns (Needles et al. 2010).
Since, the supervisors spend an equal amount of time with each employee they supervise, the costs associated with it are fixed, and they do not vary directly with resource usage. Since the building is allocated based on square footage, the costs are variable. There is a direct correlation between amount of space used and the rent. There is also a direct correlation between the Energy or electric power consumed and the number of units produced (Needles et al. 2010).
In terms of labour, the costs are variable as they change in direct proportion to the number of units produced. The cost of equipment is fixed and does not vary directly to the units produced. The cost of materials varies in direct proportion to the number of units produced. There is an indirect relationship between amount of supplies and production time. The costs therefore vary in direct proportion to the resource consumption ((Hansen et al. ...Download file to see next pagesRead More
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