What is meant by cost drivers An example

A cost driver is any event or circumstance that results in a change in consumption of resources that affects quality and cycle time. A job may have multiple drivers. A cost driver does not need to be quantified, but it has a significant impact on the selection of job drivers and resource drivers.

For example, in logistics, to ship a box, the volume, weight, number of trips, and road conditions are all cost drivers.

Extended information:

When a job is performed multiple times, the consumption of resource costs exhibits significant variability, although if there is an approximate relationship between the consumption of resource costs and the time spent on the job or some other quantity measure, there is no significant variability. However, if there is an approximate positive relationship between the consumption of resources and the time spent on the job or other quantity measures, then the cost driver is said to be the quantity driver. The quantity driver can be in the form of operating time, or in the form of volume, weight, or other measures of resource consumption.

The cost of the job is divided by the total of the quantity drivers to obtain the cost driver rate. Quantity drivers are qualitatively more accurate than execution drivers, but they are also much more costly to apply, as each product may be consumed multiple times by different jobs, and observing and recording the amount of time spent or resources expended on each job is a tedious and large task.