In the traditional view of cost behavior, the most common cost driver is units produced. In the activity-based view of costing cost drivers are outputs of resources and activities that accountants can measure.

To apply the activity-based view, which most large business use to assess costs, we must identify the resources used by each activity and the cost diver for each resource. The production department of say General Motors will have the following costs Labor wages, supervisory wages, maintenance wages and energy costs among others. The cost driver for labor would be labor hours, for supervisory wages the number of people supervised, for maintenance wages the number of mechanic hours and for energy cost kilowatt hours.

What would be the cost drivers for the activities to satisfy the two types of customers and what are some of the other departments, their costs and drivers?

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To apply the activitybased view of costing to satisfy two types of customers we need to identify the ... View the full answer