The list of bases an overhead cost can be shared out on: machine hours, labour hours, output tonnage, floor area, headcount and so on.
When to use it
When you set overhead costing up. After that, only if you need a basis the supplied list does not already cover.
Before you start
- Decide what the cost really varies with. A driver is only as good as the measurement behind it.
- The Unit of Measure you want to express the driver in should already exist.
- You need rights to create masters.
Where to find it
Masters > Manufacturing > Cost Drivers.
The fields on this screen
| Field (on screen) | What to enter | Required |
|---|---|---|
| Code | Short code for this driver, such as machine_hr or kwh. Keep it unique. | No |
| Driver Name | Name of the basis costs are shared out on, such as Machine Hours or Floor Area. | No |
| Measure Source (manual/machine_hours/labour_hours/output_qty) | Where the driver's measure comes from. Type one of: bom_norm, metered, captured, master_attr, manual. | No |
| Unit of Measure (id) | Unit the driver's measure is counted in, such as hours, kWh or square feet. | No |
| Ratio Driver | Marks a driver that shares cost in proportion to its measure, not by a direct, fixed or even split. | No |
| Sort Order | Sets the order drivers appear in on lists. Lower numbers come first. | No |
How it works
- A standard set is supplied, and it is usually enough: production quantity, production value, weight, machine hours, labour hours, power, floor area, headcount, direct percentage, fixed amount and even split. Add your own only for a basis you actually measure.
- Tick Ratio Driver when the cost is shared in proportion to a measured quantity. Leave it clear for a basis that is not a measurement: a fixed amount, a stated percentage, or an even split between everybody.
- A driver does nothing on its own. It is put to work in two places. A Cost Element Ledger says what a particular expense account is driven by. A Cost Allocation Rule says which pool of cost is shared out on which driver, and across which products or cost centers.
- An allocation run divides the pool by the quantity measured for each period. Once a run has been made, the result shows on the Overhead Allocation and Apportionment report and feeds through into the Production Cost Sheet.
- Sort Order only decides the order the drivers appear in a list.
Tips and common mistakes
- Keep the Code short, and do not repeat one.
- Measure Source records where the quantity is going to come from. It is free text, so copy the wording an existing driver uses instead of inventing new wording, or the list stops being readable.
- Do not delete a driver that a Cost Allocation Rule or a Cost Element Ledger already points at.
- Adding a driver does not change any cost. Nothing moves until a rule uses it and an allocation run is made.
Related guides
- Cost Allocation Rules, Cost Element Ledgers, Overhead Allocation and Apportionment, Production Cost Sheet.