Define cost drivers

 · A cost driver affects the cost of specific business activities. In activity-based costing (ABC), an activity cost driver influences the costs of . In accounting, the cost driver definition is a factor that incurs cost. Use cost drivers to allocate variable and indirect costs to production activities or output. Include both indirect costs and direct costs to compute the full cost of production. Because indirect costs, such as variable overhead, are not directly traceable to production activities, allocate them according to a cost driver rate . cost drivers. elements of a firm's operations which individually and collectively determines the level of the firm's (average or unit) COSTS. The ability to ‘drive’ or ‘manage’ costs down (or contain cost increases) is an important strategic consideration where cost leadership is the key basis of the firm's COMPETITIVE ADVANTAGE over rival suppliers.

cost drivers. elements of a firm's operations which individually and collectively determines the level of the firm's (average or unit) COSTS. The ability to ‘drive’ or ‘manage’ costs down (or contain cost increases) is an important strategic consideration where cost leadership is the key basis of the firm's COMPETITIVE ADVANTAGE over rival suppliers. A cost driver affects the cost of specific business activities. In activity-based costing (ABC), an activity cost driver influences the costs of labor, maintenance, or other variable costs. Cost. A cost driver is that factor or variable which has a cause and effect relationship with the total cost. The cost driver is the ’cause’, and the ‘total cost incurred’ is the effect of it. If we take an example of fuel cost of running a car, the cost driver (cause) would be ‘No. of Kms Run’, and the total cost (effect) would be ‘total cost of fuel’.

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