Share
Explore BrainMass

Cost-Drivers

1. What other examples of cost drivers can you think of?

2. It would seem to me that payroll would be considered as variable when it is subject to change. One example that comes to mind is seasonal hires. Local retailers often beef up their workforce during the holidays. To me this would be an example of when payroll might be considered to be a variable expense. Another example that comes to mind would be pay based on performance. I once had a job where I was paid piece rate. The faster I worked the more money I made. I'm not sure if this would be a variable cost, but it makes sense to me that it would. My pay was dependent upon my productivity. Does anyone have any thoughts on this?

3. 'Budgeting is an unnecessary burden on many mangers. It takes time away from important day-to-day problems'. Do you agree? Explain.

4. 'We want a flexible budget because costs are difficult to predict. We need the flexibility to change budgeted costs as input prices change.' Does a flexible budget serve this purpose? Explain.

Solution Preview

1. What other examples of cost drivers can you think of?

I can think of many cost drivers for a business. For example, a person will have to pay attention to the parts of a product, paying the supplier/manufacturer, and the supply and demand of each. A cost driver is one that is something that can make the cost increase or decrease based off the supply and demand of any given product or service. When it comes to parts of a product, these can range from screws, plastic, metal, paper, piping, electricity and so forth. All of these can drive a product to cost more for the consumer for an individual or family who is interested in purchasing it, such as a Scentsy warmer. A Scentsy warmer consists of clay to mold into the shape, the light bulb, wires and wax. With all of these combined, this can cost $25 without tax. When a person sees the cost, he or she may not want to buy it or will save up to purchase it later. This is because sometimes the cost can also drive a person away from getting what he or she needs in order to survive, or to have something for decoration. Furthermore, when it comes to having electricity in a house, a licensed electrician has to get hired who has all the necessary components in order to buy the necessary products, so that this is the case for a particular house or apartment that is in need of having it. Regardless, cost drivers impact a business both positively and negatively; however, the goal currently is to make them as cheap as possible for both the company and the consumer, which makes all their hard work worth it in the end for all levels of management and for those that are employees as well.

2. It would seem to me that payroll would be considered as a variable when it is subject to change. One example that comes to mind is seasonal hires. Local retailers often beef up their workforce ...

Solution Summary

This solution discussed cost-drivers and budgets.

$2.19