Define: Activity Measure

UK Accounting Glossary

Definition: Activity Measure

Quick Summary

An activity measure is a standard by which the primary output of an activity is gauged.

What is the dictionary definition of Activity Measure?

Dictionary Definition

In activity based costing systems, this is a measure of the volume or rate of activity in an activity cost pool used as a basis for allocating costs.

Ideally, the activity measure selected will be such that any rise or fall in the measure closely correlates with a rise or fall in the activities total cost.

As a result, the terms activity measure and cost driver are often used anonymously.

Full Definition

Examples of activity measures include:

  • Direct Labour hours
  • Machine hours
  • Volume Of deliveries
  • Units of Output
  • Quantity Of Production Run Setups

In a large international organisation there may potentially be thousands of activity measures, whereas in a small organisation perhaps only 20-30 measures may apply.

Note; there is no optimal number of activity measures applicable to an organisation. It’s also worth mentioning that managers also have a tendency to prioritise one type of activity measure over another whilst measuring performance.

Some activity measure, like labour hours for example; closely correlate to the volume of productions, whereas others, such as the volume of orders, aren’t.

Activity Measure FAQ's