What Is Cost Driver In Accounting [verified] May 2026

In the world of managerial accounting, knowing how and why costs accumulate is essential for profitability. This is where the concept of a cost driver becomes critical. Definition of a Cost Driver A cost driver is the direct cause of a cost. It is a unit of activity (e.g., machine hours, labor hours, or units produced) that causes a change in the cost of an activity or product.

In simple terms:

In the world of managerial accounting, knowing how and why costs accumulate is essential for profitability. This is where the concept of a cost driver becomes critical. Definition of a Cost Driver A cost driver is the direct cause of a cost. It is a unit of activity (e.g., machine hours, labor hours, or units produced) that causes a change in the cost of an activity or product.

In simple terms:

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