• Is any factor whose change causes a change in the total cost of a related cost object.  Hence a change in the level of cost driver will cause a change in the level of the total cost of a related cost object.

Examples of cost driver used in the following business units:

• Research & Development :- Number of research projects, technical complexities of the projects
• Design of products, services & process:- number of products in design, number of parts per product,
• Marketing:- number of advertisement run, number of sales personnel, sales revenue
• Distribution:-number of items distributed, number of customers, weight of items distributed
• Customer services:-numbers of service calls, hours spent in servicing of products.