cost drivers

Cost drivers are factors that cause or influence the amount of costs incurred by a business. They determine how much resources or expenses are needed to produce goods or deliver services. For example, the number of units produced, the complexity of a product, or the number of customer orders can all drive costs. Understanding cost drivers helps businesses manage expenses effectively by identifying what factors impact costs most, allowing for better budgeting, pricing, and process improvements. In essence, cost drivers are the key elements that explain why costs change.