Cost drivers accounting definition

 · A cost driver in accounting refers to any unit of action taken by a business that costs money. Study the definition, examples, .  · What is a Cost Driver? A cost driver triggers a change in the cost of an activity. The concept is most commonly used to assign overhead costs to the number of produced units. It can also be used in activity-based costing analysis to determine the causes of overhead, which can be used to minimize overhead costs. A large number of cost drivers may be used within Estimated Reading Time: 30 secs.

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. A cost driver is a variable, such as the level of activity or volume, that causally affects total costs over a given time pan contributes the most to the cost, causes the cost! For example, the number of vehicles assembles Online Accounting is a driver of the costs of steering wheels on a motor-vehicle assembly line. A cost driver is the direct cause of a cost, and its effect is on the total cost incurred. For example, if you are to determine the amount of electricity consumed in a particular period, the number of units consumed determines the total bill for electricity. In such a scenario, the units of electricity consumed.

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