Driver Examples - Cost

Marco nodded. "Of course. I make more pizzas, I spend more on dough and cheese."

| | Example Cost Driver | Rationale | |--------------|------------------------|----------------| | Purchasing | Number of purchase orders | Each order incurs processing, shipping, and inspection costs regardless of order size. | | Production setup | Number of setups | Time and labor to reconfigure machinery before a batch run. | | Quality control | Number of inspections | Directly correlates with testing time and defect detection effort. | | Machine maintenance | Machine hours | More runtime leads to higher wear, lubricants, and technician labor. | | Customer service | Number of support calls | Each call consumes agent time and system resources. | | Packaging | Number of units packed | Direct variable relationship with materials and handling labor. | | Shipping | Weight or volume of goods | Fuel, handling, and carrier costs scale with physical measures. | | Order processing | Number of customer orders | Administrative steps (entry, verification, invoicing) per order. | cost driver examples

Armed with Sophie’s report, Marco had a choice to make. He could become like Elena—simplifying his menu, automating his process, and maximizing efficiency. Or, he could keep his artisan ways, but raise his prices to $22 a pizza to cover the high cost of his drivers. Marco nodded

In the end, the "Cost Drivers" were the invisible hands in the financial accounts of the pizzerias: | | Production setup | Number of setups

"I have something for everyone!" Marco boasted. "Elena only sells pepperoni, cheese, and sausage. She limits her customers."

In high-tech manufacturing, quality control costs are driven by the time spent testing components to ensure they meet safety standards. 3. Structural and Executional Drivers