What Is Cost Drivers |top| Jun 2026

A is any factor that causes a change in the cost of an activity, product, or service. In simple terms: If the driver increases, the cost usually increases too.

| Term | Meaning | Example | |-------|---------|---------| | | Group of similar indirect costs | Factory rent, utilities, depreciation | | Cost driver | Factor used to allocate the pool | Machine hours | | Cost object | What you’re costing (product, service, customer) | Product A | what is cost drivers

In business and accounting, a is the direct cause of an expense. It is any activity or factor that triggers a change in the total cost of a product, service, or process. A is any factor that causes a change

Used in Activity-Based Costing (ABC) , these allocate overhead costs based on specific operational activities. It is any activity or factor that triggers

| Function | Cost Driver | |----------|--------------| | Manufacturing | Machine hours, direct labor hours, units produced | | Purchasing | Number of purchase orders, suppliers | | Quality control | Number of inspections, defect rate | | Distribution | Miles driven, weight shipped, number of deliveries | | Customer service | Number of calls, tickets, support hours | | IT | Number of users, servers, transactions | | HR | Number of employees, new hires, training hours |