Cost Driver
A cost driver is a measurable factor used to explain resource consumption or assign an activity's cost to products, services, or customers.
Cost-driver and production-cost terms used to trace, allocate, and interpret operating costs.
This section connects the resources a business consumes with the products, services, customers, and activities that use them. It is most useful when direct tracing is incomplete and managers need a supportable way to understand production overhead, capacity, and indirect work.
Cost Driver explains how activity-based costing links a homogeneous cost pool to measurable activity. Overhead covers indirect costs, while Fixed Costs vs. Variable Costs separates assignment from cost behavior.
An allocated amount is not automatically causal, incremental, or avoidable. Use these concepts with process evidence, capacity assumptions, and a reconciliation to source records before applying them to pricing, product mix, outsourcing, or discontinuation decisions.
These pages are educational and do not provide accounting, audit, pricing, management, tax, or investment advice.
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A cost driver is a measurable factor used to explain resource consumption or assign an activity's cost to products, services, or customers.