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Business Definition for: activity cost driver
Dictionary of Accounting Terms
activity cost driver

best single measure of the frequency and intensity of the demands placed on activities by intermediate and final cost objectives. It is used to reassign activity costs to cost objects. It represents a line item on the bill of activities for a product or customer. An example is the number of part numbers, which is used to measure the consumption of material-related activities by each product, material type, or component. The number of customer orders measures the consumption of order-entry activities by each customer. Sometimes an activity driver is used as an indicator of the output of an activity, such as the number of purchase orders prepared by the purchasing activity.

See also cost objects , bill of activities , intensity
Related Terms:
cost objects

intermediate and final dispositions of cost pools. Intermediate cost objects receive temporary accumulations of costs as the cost pools move from their originating points to the final cost objects. Final cost objects, such as a job, product, or process, shouldbe logically linked with the cost pool based on a cause-and-effect relationship.

bill of activities

listing of the activities and activity volumes and associated costs required by a product, service, process output, or other cost object.

intensity

cost consumed by each unit of the activity driver. It is assumed that the intensity of each unit of the activity driver for a single activity is equal. Unequal intensity means that the activity should be broken into smaller activities or that a different activity driver should be chosen.

Referring Terms:
activity cost assignment
homogeneity
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