What is a cost driver? Business units with examples of some cost drivers

A cost driver:

  • Is any factor whose change causes a change in the total cost of a related cost object. ┬áHence 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.

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