The most basic cost driver is customer demand. Without customer demand for products or services, the organization cannot exist. Cost drivers are characteristics of activities or events that cause a business to incur costs. The cost at issue often is referred to as the cost object. By analyzing. Structural Cost Drivers Example. Some examples of possible structural cost drivers for a retail store might be: Determining the size of stores. The example of an internet retailer such as Bikes.com is a good example of the type of firm that must pay close attention to executional cost drivers. The reason is that its success depends on customer service – prompt response to customer requests, and prompt and accurate filling of customer orders. Executional DefinitionTo serve customers, managers and employees make a variety of decisions and take numerous actions. These decisions and actions—undertaken to satisfy customer demand—drives costs. An activity is a unit of work. To serve a customer at a restaurant, for example, a waiter or waitress might perform the following units of work: seat customer and offer menu, take customer order, send order to kitchen, bring food to customer, serve and replenish beverages, determine and bring bill to customer, collect money and give change, clear and reset table. Each of these is an activity, and the performance of each activity consumes resources that cost money. To manage activities and their costs, it is necessary to understand how costs respond to cost drivers, which are the factors that cause or influence costs. Advertisement While these cost drivers may be classified in a variety of ways, I believe that dividing them into the three categories of structural, organizational, and activity cost drivers, as I am going to present in this post, provides a useful foundation for the study of managerial accounting. The 3 Fundamental Cost Drivers • Structural Cost Driver – Fundamental choices about the size and scope of operations and Structural technologies employed in delivering products or services to customers. For example: Apple Computer’s decision to enter the online music distribution business. • Organizational Cost Drivers – Choices concerning the organization of activities and the involvement of persons inside and outside the organization in decision making. Executional StyleAuthorizing lower-level employees to make decisions to solve problems is an example of an organizational cost driver. Summer training project report on performance appraisal pdf. • Activity Cost Drivers – Specific units of work (activities) performed to serve customer needs that consume costly resources. Assembling a product is an example of an activity cost driver. How can you use information about structural, organizational, and activity cost drivers to help you in implementing the organization’s strategy? It is important that an organization’s cost structure be aligned with its strategy. If your goal is to be a cost leader (such as Wal-Mart or Costco), you will want to make sure that the structural cost drivers, such as the type of buildings acquired and the displays used are consistent with this strategy. Grisham, john-innocent man, the - epub - zeke23. The police think April could have been kidnapped by a distant cousin of the Finnemore family, Jack Leeper, who escaped from prison a few days before April went missing.
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