Driver-Based Costing

Companies use methods like Activity-Based Costing, Driver-Based Costing, and TDABC with the goal of allocating resource and overhead costs in a meaningful way to improve customer and product profitability. Enabling driver-based costing processes gives you the ability to accurately assign resource cost and spending pools to your products and customers using relevant and measurable drivers. By understanding the true drivers of cost, your entire organization is armed with vital information that can drive better decisions that improve overall profitability.

By engaging in a process that allocates costs based on the events that generate them, you can get more accurate and specific costs answers to guide and improve decisions across the organization. The goal: to identify the activities that create costs by assigning cost drivers with resource cost pools and applying rules to determine the products or services that consume those resources.

Driver-Based Costing - 3C Software

The data set required to effectively implement an ABC program is enormous, so the key to any successful implementation requires a platform that scales to handle large volumes, accommodates changes to business requirements, traces and analyzes root causes, and provides access to multiple users. ImpactECS models assign overhead costs to products or customers for an unlimited number of activities, using the most appropriate cost drivers. The detailed analysis available with the ImpactECS platform helps your team answer strategic questions like, “Which customers or products are profitable?” and “What activities are driving costs?”

ImpactECS enables robust driver-based costing processes that drive decisions

  • Calculate end-to-end costs: Build traditional ABC, time-driven, or hybrid driver models to assign both direct and indirect costs via activities for each product or service you provide
  • Allocate overhead spending: Assign meaningful drivers and pool general ledger or forecasted spending to dynamically calculate allocation rates
  • Reduce activity costs: Identify underperforming or expensive activities at the unit, batch, product, customer, market, or entity level
  • Analyze product margins: Pinpoint unprofitable products or categories to educate stakeholders in product development, operations, sales, and leadership – and inform decisions on product availability
  • Improve strategic decisions: Employ ABC to gain insights on pricing decisions, outsourcing, production facility costs, distribution channel costs, customer and product profitability, and to benchmark activity cost performance

Product Costing for Modern Finance Teams

With 93% of organizations currently engaged in, or planning programs, to improve the quality of their cost information, it’s no surprise that finance leaders are keenly focused on the effects of product costs on their overall performance.

Check out this recorded discussion featuring forward-looking finance leaders that have made a positive impact on their organization’s performance by understanding the rules, tools, and data necessary to make informed tactical and strategic decisions.


Creating a Cost-Focused Culture

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It Starts with Costs

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Daily News for Finance Leaders

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Get Quick Insights and Best Practices

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Is Your Product Costing Process Healthy?

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Raw Material Spending and Your Budget

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