Cost Driver Determination in Activity Based Costing Systems Using Data Mining Process and Factor Analysis Methods



Most of firms are very interested to know about the real cost of products and services they provide. In order to measure the real cost, several methods and techniques have been provided in literature. One of the most important of them is Activity Based Costing (ABC) method. Determination of cost drivers in ABC regards as a very difficult stage. Although various methods introduced for this purpose but each method has its own weaknesses. This paper introduces Data Mining (DM) and Factor Analysis methods to improve the effectiveness of ABC method. The proposed methods let decision makers to consider several cost drivers respect to their effects on costing simultaneously. We have applied the proposed method in one of Iranian leading banks (Export Development Bank of Iran (EDBI). The results confirmed the usefulness and effectiveness of the proposed methods for bank ABC system and its economic decisions