ACC M118 Lecture Notes - Lecture 31: Cost Driver
Document Summary
Ask why you need an expense before including it leading to a cost benefit analysis and prioritizing each expense. Great case recommendation when a company is struggling and needs to turn their company aroundor is half-assing their budget. Very detailed and you can easily explain against actual. Ensures managers are aware of their budget and components and company objectives. Focus on smaller costs which takes time, resources and effort for a small reward. Can result in short-term focused approach; long term strategy gets overlooked. Select activity, allocate to appropriate cost pool and allocate based on the cost driver. Can be difficult to implement since you need to identify all the key activities and their cost drivers. If you see they aren"t comparing budgets to actuals in a case then your recommendation can be to do so. If you see they don"t use budgets at all, you can recommend that they do so.
