Define key cost drivers

Cost Driver Definition. 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 affects the cost of specific business activities. In activity-based costing (ABC), an activity cost driver influences the costs of .  · Examples of key drivers include location, customer satisfaction, performance relating to costs, employee engagement or turnover, and profitability. Companies should only pick a few key drivers.

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 an activity-based costing system. Cost Driver Definition. 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. Fixed costs have the least effect on profit. Each key economic driver in a business’ economics is unique but each key driver is dependent on all of the other drivers. One cannot be affected without influencing the performance of the other. These key drivers are an economic force behind the business growth and profitability.

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