When a business produces a product or service, using any resources produces an expense for the company. Knowing the answer to "What are cost drivers?" can help you understand the impact and importance on business operations. In this article, we discuss the definition and importance of cost drivers, identify the differences between direct and indirect costs, explain the principle of activity-based costing practices, and highlight several examples of standard cost drivers in business operations. Learning about cost drivers in business can help you ensure that a company accounts for all expenses during production and remains profitable. One element of financial analysis is understanding cost drivers that affect the production of products or services. Capturing, monitoring, and evaluating various business expenses is critical to running a financially healthy company.
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March 2023
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