Activity Drivers Law and Legal Definition

Activity Drivers, in activity based costing (ABC), activity costs are assigned to outputs using activity drivers. Activity drivers are best single measure of the frequency and intensity of the demands placed on activities by intermediate and final cost objectives. It is used to reassign activity costs to cost objects. It represents a line item on the bill of activities for a product or customer. An example is the number of part numbers, which is used to measure the consumption of material-related activities by each product, material type, or component. The number of customer orders measures the consumption of order-entry activities by each customer. Sometimes an activity driver is used as an indicator of the output of an activity, such as the number of purchase orders prepared by the purchasing activity. For example, a driver may be the number of times an activity is performed (transaction driver) or the length of time an activity is performed (duration driver).