Examples Of Cost Drivers In Globalization
A factory has a machine that requires periodic maintenance. This maintenance incurs costs to be allocated to the products produced by the machinery. Therefore, the cost driver is identified and used as a base to distribute the costs. In this example, the cost driver selected is 'machinery hours.'
Examples Of Cost Drivers In Retail
It is determined that after every 1,000 machine hours, maintenance costing $500 is performed. Therefore, every machine hour results in an eventual 50 cents in maintenance costs that can be allocated to the product being manufactured based on the cost driver of machine hours.