Glossary
Resource Driver
Tags: Glossary
In cost accounting, the best single quantitative measure of the frequency and intensity of demands placed on a resource by other resources, activities, or cost objects is known as the activity driver. It is used to assign resource costs to activities, cost objects, or other resources.
What is Resource Driver?
Resource Driver
In the field of logistics and cost accounting, understanding the concept of a resource driver is essential. A resource driver is a valuable tool used to measure the frequency and intensity of demands placed on a resource by other resources, activities, or cost objects. It serves as a quantitative measure that helps assign resource costs to various activities, cost objects, or even other resources.
To comprehend the significance of a resource driver, let's consider an example. Imagine a manufacturing company that produces bicycles. In this scenario, the resources involved could include raw materials, labor, machinery, and utilities. Each of these resources is utilized differently and has varying levels of demand placed upon them.
The resource driver helps us identify and measure the demands placed on these resources. For instance, the number of bicycles produced could be a resource driver for labor and machinery. The more bicycles produced, the higher the demand for labor and machinery resources. Similarly, the amount of raw materials used could be a resource driver for the raw material inventory.
By using resource drivers, companies can accurately allocate costs to different activities, cost objects, or resources. This information is crucial for effective cost management and decision-making. It allows businesses to identify which activities or cost objects are consuming the most resources and in turn, incurring higher costs.
Resource drivers also enable companies to analyze and optimize their operations. By understanding the frequency and intensity of demands placed on resources, businesses can identify areas where improvements can be made. For example, if a particular activity is consistently placing a high demand on a resource, the company can explore ways to streamline or optimize that activity to reduce costs.
In conclusion, a resource driver is a valuable tool in logistics and cost accounting. It helps measure the frequency and intensity of demands placed on resources by other resources, activities, or cost objects. By using resource drivers, companies can accurately allocate costs, analyze resource utilization, and make informed decisions to optimize their operations. Understanding and utilizing resource drivers is crucial for effective cost management and overall success in logistics and supply chain management.