Selection of the Key Cost Driver by Observation
Once you are satisfied that your formulas are fine, list the drivers for each cost (this was done in Figure 5-2 by our Customer Services team at Anything Inc.). Now discuss the impact that each of the drivers have on a given cost or a number of cost elements. With the help of your ten-meter managers you should be able to see which one or more of the drivers would make the biggest impact. Some people feel that it is not wise to use a subjective approach to selecting key cost drivers. I would agree with them if the decision were being made by an individual without an inside knowledge of the process. However, in all probability you have a team of people that have a good knowledge of the process, key ...
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