What is Cost Drivers

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Cost driver - any factor whose change causes a change in the total cost of a related cost object; more simply, any factor that causes costs.

We assume a causal relation exists between the use of the cost driver and the incurrence of the cost.

Cost drivers can be financial (e.g., direct materials costs) or non-financial (e.g., number of equipment setups, number of transactions processed).

Costs are often categorized based on their behavior relative to a cost driver.

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