Define a cost driver

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 to apply these costs to . 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.

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 to apply these costs to production activities. The cost driver definition implicit driver option lets you use a table to define the driver quantities and driver targets using an implicit pointer to point to a particular table. Use this driver to specify specific subsets of costs such as transaction costs. Let’s first look at the technical definition of cost drivers. 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.

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