# Cost Driver

A cost driver ( German cost driver ) is in the course of activity-based costing applied reference, part of that help overheads in a company via defined processes stress to meet the cost units to be distributed. The cost driver is intended to largely replace the overhead rates used in traditional cost accounting . This shows the costs charged to the end products more accurately, so that wrong business decisions (e.g. in outsourcing or pricing and conditions policy ) can be better counteracted.

The cost driver should be as proportional as possible to the costs of a process or a cost center . So those reference values ​​should be chosen that have a significant influence on the level of process costs. For example, if customer delivery is a process defined by the company, the number of packages, the size of the packages or the weight of the packages could be a cost driver. The aim is to use this size to determine a process cost rate per service unit and thus to make the costs variable.

## Determination of suitable cost drivers

Often different reference values ​​come into consideration as cost drivers, all of which seem to have a proportional relationship to the level of process costs. For this reason, a comparison of the individual process costs with the relevant reference values ​​(cost drivers) is used as an alternative. The reference value selected is the one whose percentage change over time comes closest to that of the individual process costs.

### example

Fiscal year Costs of the "customer delivery" process Number of deliveries Weight of supplies Volume of deliveries
2013 € 23,411 843 pcs. 6.747 kg 466 m³
2014 € 25,992 890 pcs. 6.821 kg 520 m³
growth 11.0% 5.6% 1.1% 11.6%

In this example, there are three possible cost drivers to choose from for the "customer delivery" process:

• the number of deliveries
• the weight of the supplies or
• the volume of deliveries

A comparison of the percentage changes to the previous year shows that the reference variable c (volume) appears to be the most suitable cost driver, as it has the greatest proportionality to the individual process costs.

### Calculation of the process cost rate

In the specific case, the litigation cost rate is (based on 2013):

${\ displaystyle P _ {\ mathrm {LE}} = {\ frac {K _ {\ text {process}}} {{\ text {number}} _ {\ mathrm {LE}}}} = {\ frac {23 { .} 411 \, \ mathrm {euro}} {466 \, \ mathrm {m} ^ {3}}} = 50 {,} 24 \, \ mathrm {euro} / \ mathrm {m} ^ {3}}$

With

${\ displaystyle P _ {\ mathrm {LE}}}$: Process costs per service unit (process cost rate)
${\ displaystyle K _ {\ text {process}}}$: Litigation costs
${\ displaystyle {\ text {number}} _ {\ mathrm {LE}}}$: Power units