Short note on cost driver
Understand the Problem
The question is asking for a brief explanation or summary of what a cost driver is. A cost driver is an element that causes a change in the cost of an activity. It helps in understanding how costs are influenced by various factors in a business environment.
Answer
A cost driver is a factor or activity causing a change in business costs.
A cost driver is any factor or activity that causes a change in the cost of a business operation. It is the root cause of why a particular cost occurs and is used to track and allocate expenses accurately.
Answer for screen readers
A cost driver is any factor or activity that causes a change in the cost of a business operation. It is the root cause of why a particular cost occurs and is used to track and allocate expenses accurately.
More Information
Cost drivers are essential in cost accounting for accurately assigning overhead and operating expenses to products or services based on the activities that generate those costs. They help businesses understand where their money is going and how effectively different parts of their operation drive expenses.
Tips
A common mistake is confusing cost drivers with cost centers or simply costs. Cost drivers specifically relate to activities that cause changes in costs.
Sources
- Cost Drivers - Definition, Example, Types, Importance - WallStreetMojo - wallstreetmojo.com
- Cost driver definition - AccountingTools - accountingtools.com
- Cost Driver | Definition, How It Works, Types & Significance - Finance Strategists - financestrategists.com
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