Question

How would you go about redesigning an account based forecasting to a driver based forecasting. What steps would you take to change the forecasting model from account base to driver base

Answer 1

The account based forecasting is process of adding the Overhead account balance to the production account to calculate total cost of production of the product. On the other hand, the driver based forecasting is based on drawing cost of the production by adding overhead cost of total driver used in production by multipling cost per driver with quantum of units of driver used.

The steps to change the forecasting model from account base to driver base includes :

1. Deciding on the Driver: The cost driver ie. DLH, DLC or MH should be decided.

2. Calculating the overhead cost per cost driver.

3. Drivers used : We calculate the number of drivers used in production.

4. Total expected overhead used : The total overhead used by multipling overhead cost per driver with quantum of units of driver used.

5. Adding the expected overhead to production account to get total cost of production.

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