Cost driver

 · 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. If we take an example of fuel cost of running a car, the cost driver (cause) would be ‘No. of Kms Run’, and the total cost (effect) would be ‘total cost of fuel’.Reviews: 1.  · A cost driver, such as inspections, machine setups, or order taking, is selected for each cost grouping. Analysis of cost drivers allows for better selection of true overhead cost drivers and more appropriate allocation of www.doorway.ru: Patty Graybeal, Mitchell Franklin, Dixon Cooper. 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! These are an advantage for a product as they bring out the actual cost incurred on the products based on the correct allocation of the processes or activities. Indirect.

A cost driver is a factor that creates or drives the cost of the activity. It is the root cause of why a particular cost occurred. Activities consume resources while customers, products, and channels of production consume activities. Understanding this is fundamental to the cost allocation concept using cost drivers. 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 an. Cost Driver Rates. A cost driver rate is the amount of indirect or variable cost assigned to each unit of cost driver activity. For example, you may apply indirect overhead to direct labor hours as $50 dollars per hour. In this case, for each hour of direct labor required for production, the company would then allocate $50 of indirect overhead.

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