Posted in Operations and Supply Chain Terms, Total Reads: 305
Definition: Resource Driver
It is a measure of the resources consumed for a particular activity. It is used to know which resources are consumed on a large scale for a particular activity or particular set of activities. It is used to keep a track of the resources consumed and then take decisions to minimize resource utilization while increasing the output.
It is an important concept used in allocation of resources and budgeting which is done by companies. The costs that are deemed appropriate for a particular activity are apportioned to different resources which form the major cost drivers for that activity.
In cost accounting, it is a measure of the frequency and intensity of demands placed on a resource by other resources, activities, or cost objects. It's used to assign resource costs to activities and cost objects.
A typical example of a resource driver for a company would be 1 kg of flour used for making biscuits or 1 hour of labour work required for running the oven for baking the biscuits. The resource drivers keep changing based on the product you manufacture and how it is accounted for by your company.