Question

Classifying Cost Drivers

Classify each of the following as structural, organizational, or activity cost drivers.

(a) Apple Inc. reorganizes production facilities from a layout in which all similar types of machines are grouped together to a layout in which a set of machines is designated for the production of a particular product and that set of machines is grouped together.

Structural

Organizational

Activity

(b) A cable television company decides to start offering telephone service.

Structural

Organizational

Activity

(c) IBM Corporation decides to stop making personal computers.

Structural

Organizational

Activity

(d) Canon decides to start making high-volume photocopy equipment to compete head-to-head with Xerox.

Structural

Organizational

Activity

(e) The number of meals a cafeteria serves.

Structural

Organizational

Activity

(f) The number of miles a taxi is driven.

Structural

Organizational

Activity

(g) A company eliminates the position of supervisor and has each work group elect a team leader.

Structural

Organizational

Activity

(h) Tesla empowers employees to halt production if a quality problem is identified.

Structural

Organizational

Activity

(i) The number of tons of grain a ship loads.

Structural

Organizational

Activity

(j) Northbrook Mall decides to build space for 80 additional stores.

Structural

Organizational

Activity

Answer 1

First let's see the definitions of organizational, structural and activity cost drivers.

1 organizational activity cost drivers are choices concerning the organization of activities and personnel inside and outside the organization in decision making.(usually inter organization decision in perspect of activities and personnel)

2 structural cost drivers regard to the choices made in relation to size and scope of operations and technologies employed in delivering goods and services to the customers.

3 activity cost drivers are helpful in identifying the specific costs in relation to rendering services or delivering goods to customers.

CLASSIFICATION :

(a) organizational cost driver (because it is just changing the layout within the organization)

(b) structural cost driver (because the scope has changed)

(c) structural cost driver (because the scope will change)

(d) structural cost driver ( because the scope of organization will change)

(e) activity cost driver (associated with a particular driver (reason) of i.e., meals)

(f) activity cost driver ( associated with a particular driver reason i.e., miles)

(g) organizational cost driver (change of personnel structure within the organization)

(h) organizational cost driver ( increase in authority of employees (within organization) )

(i) activity cost driver (associated with a particular driver (reason) tons i.e., quantity)

(j) structural cost driver ( change in size of organization)