Cost Driver
Bridgespan Cost Analysis Toolkit
Step 4: Allocate indirect costs
Template: Identifying cost drivers
Cost drivers are measurable factors that allow you to determine the relationship between the indirect cost and each program area. They are program-related units that cause an indirect cost to increase or decrease. Another way to think about it would be factors that can approximate the demand that each of your program places on the particular resource item. The appropriate driver may be different for each cost item, depending on which is the root unit that drives that particular expense, and it is up to you to determine the most relevant driver for your costs.
For each cost item, you can use this guiding question to determine the most appropriate driver:
What program-related factor causes this cost item to increase or decrease? (How do we meaningfully distribute this cost across programs?)
See next page for a list of common cost items and possible cost drivers.
What program-related factor causes this cost item to increase or decrease? (How do we meaningfully distribute this cost across programs?)
|Cost item | | |Possible cost driver (units) |
| | |Cost per program varies with… | |
|Salaries/benefits of staff members who | |Time required of staff member |Hours spent by the staff member on each program / total hours worked by |
|work on more than one program (on | | |the staff member |
|activities identifiable by program) | |
Step 4: Allocate indirect costs
Template: Identifying cost drivers
Cost drivers are measurable factors that allow you to determine the relationship between the indirect cost and each program area. They are program-related units that cause an indirect cost to increase or decrease. Another way to think about it would be factors that can approximate the demand that each of your program places on the particular resource item. The appropriate driver may be different for each cost item, depending on which is the root unit that drives that particular expense, and it is up to you to determine the most relevant driver for your costs.
For each cost item, you can use this guiding question to determine the most appropriate driver:
What program-related factor causes this cost item to increase or decrease? (How do we meaningfully distribute this cost across programs?)
See next page for a list of common cost items and possible cost drivers.
What program-related factor causes this cost item to increase or decrease? (How do we meaningfully distribute this cost across programs?)
|Cost item | | |Possible cost driver (units) |
| | |Cost per program varies with… | |
|Salaries/benefits of staff members who | |Time required of staff member |Hours spent by the staff member on each program / total hours worked by |
|work on more than one program (on | | |the staff member |
|activities identifiable by program) | |