What is cost driver in SAP CO-OM-ABC - Activity-Based Costing?

SAP Term: cost driver

• Component: CO-OM-ABC

• Component Name: Activity-Based Costing

• Description: Main factor causing overhead, determining the process quantity used by a cost object. Cost drivers typically appear in the form of statistical key figures or are determined dynamically from various parameters.

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• Key Concepts: 
  Cost driver is a term used in Activity-Based Costing (ABC) in SAP's CO-OM-ABC module. It is a factor that influences the cost of an activity, such as the number of times an activity is performed or the amount of resources used. Cost drivers are used to allocate costs to activities and products in order to accurately measure their profitability. 
  
  How to use it: 
  In order to use cost drivers, you must first identify the activities that are associated with a product or service. Then, you must determine which cost drivers are most relevant for each activity. Finally, you must assign a cost driver rate to each activity based on the cost driver's influence on the activity's cost. 
  
  Tips & Tricks: 
  When assigning cost driver rates, it is important to consider the accuracy of the rate. If the rate is too low, it will not accurately reflect the cost of the activity; if it is too high, it will overstate the cost of the activity. It is also important to consider how often the cost driver rate should be updated; if it is not updated regularly, it may become outdated and inaccurate. 
  
  Related Information: 
  Activity-Based Costing (ABC) is a method of allocating costs to activities and products in order to accurately measure their profitability. It is used in many industries, including manufacturing, healthcare, and finance. In addition to cost drivers, ABC also uses other factors such as overhead costs and resource utilization rates in order to allocate costs accurately.