Cost Drivers of Manufacturing Overhead: A Cross-Sectional Analysis of Automobile Component Manufacturing Plants

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Ahn, Taesik
Issue Date
College of Business Administration (경영대학)
Seoul Journal of Business, Volume 4(2):71~96(1998)
Cost Drivers of OverheadCost Behavior Estimation ModelsProduction Complexity to Activities
This paper tested whether volume and complexity-driven support
activity drivers are significant in explaining variation of overhead. Data
used include cost and activity data for the 74 automobile component
manufactunng plants. Each of volume and support achwty variables
showed sigmfnmt marginal contnbuhon to the explanahon of overhead
vanation Thls result supports the assumphons of both tradihonal and
ABC systems suggestmg that both volume and support achvlty dnvers
are useful for cost allocation and cost management purposes Among
the support activities, process balancing activihes, purchasing control
activities, and change actiwhes showed significant posltive effects on
manufacturing overhead
The higher level of tests showed that selected structural complexlty
variables explain the variation of support activlty drivers, especially
process balancing, purchasing control and change activities This
result partly supports the notion that structural production complexlty
drivers have significant Influence on the level of support activities We
may conclude that cost management should be considered from a
strategic vlewpomt as well as from an operabon management viewpoint.
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 04, Number 2 (1998)
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