Cost Driver

Definition: a Cost Driver is any factor or activity that directly causes a change in the cost of a business operation, acting as a trigger for expenses like machine hours, number of orders, or setups, helping managers understand cost behavior, price products accurately, and control spending for better profitability. Cost drivers are the structural causes of the cost of an activity performed in the Value Chain. They determine the behavior of costs within an activity.
A cost driver can be completely or partly or not at all under the control of a firm.
A firm's cost performance in all of its major discrete activities adds up to establish its relative cost position.

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