What Is - The Cost Driver Best

A cost driver is the direct cause of a specific cost. It is the activity or transaction that triggers an expense. Whenever that activity increases or decreases, the total cost associated with it changes in a predictable way.

Think of it as the for an expense.

| Business Activity | Cost Incurred | | | :--- | :--- | :--- | | Producing Chairs | Wood and screws | Number of units produced (More chairs = more wood). | | Assembling Tables | Labor wages | Labor hours worked (More tables = more hours). | | Running the Factory | Electricity bill | Machine hours (Longer runtime = higher bill). | | Quality Control | Inspector salary | Number of inspections (More complex products = more checks). | | Shipping | Delivery fees | Number of shipments (More orders to different addresses = higher shipping cost). | what is the cost driver

Your monthly electricity bill. Cost driver: Kilowatt-hours (kWh) of electricity used. A cost driver is the direct cause of a specific cost

A is a factor or variable that has a direct cause-and-effect relationship with the total cost of an activity or product. When the level of a cost driver changes, it triggers a corresponding change in the total cost incurred. 1. Core Concept Think of it as the for an expense