Activity Based Costing In Managerial Accounting

Running head: ACTIVITY BASED COSTING IN MANAGERIAL ACCOUNTING
Activity Based Costing In Managerial Accounting
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ACTIVITY BASED COSTING IN MANAGERIAL ACCOUNTING
Explanation of the activity trigger
An activity trigger is a process view of an activity analysis under the activity based
costing model. An activity trigger holds a rout cause, reason of which an activity is being
undertaken or gets stimulated (Wang et al., 2015). The reason for undertaking an activity
depends on the event. However, an activity affects the cost. Therefore, an activity gets
triggered based on achieving the cost efficiency into the business process. Hence, an activity
trigger acts as a cost driver in the cost of an activity. Therefore an activity trigger is an
activity cost driver which refers to an action that triggers the incurrence of the cost. A cost
driver triggers changes in the cost of activity. The result has been judged in the next level of
activity performance evaluation. With the cause of reducing the cost of production certain
activities have been undertake.While an activity trigger acts as an activity cost driver this
causes variable expenses to be incurred. Further, this has been recognized that there is a
chance of presence for more than one activity cost driver that initiates the incurrence of the
variable expenses.Being represented as a cost driver into management accounting system of
organization the activity trigger takes a part into the management information system. This
makes the decision making better and enhances the profitability as the management
undertakes required activities with the knowledge of activity cost driver. However, the cost
driver or activity gets triggered in the following situations such as: direct labour hour worked,
number of customer contacts, Number of engineering change orders issued, number of
product return from customer. Further an example of production management line for a car
manufacturing company where each department from painting to assembly has a set amount
of car that must be completed.With the changes in this number of car the cost of production
would also gets affected (Schaller et al., 2015).