A homogeneous cost pool is a set of costs whose changes are triggered by a single cost driver. A cost driver is the reason why a cost occurs. For example, in the accounting department, the number of supplier invoices handled is a cost driver, because the number of invoices that must be processed is the reason why the accounts payable staff is paid.
A homogeneous cost pool typically contains a set of similar costs. To continue with the example, a cost pool whose changes are triggered by the number of supplier invoices will likely contain the hourly wages of the payables staff, their benefit costs, and any office supplies and utilities associated with their presence. Thus, if the number of supplier invoices received were to increase, so too would these expenses, since more staff would be needed to handle the additional level of activity.
If there are a large number of cost drivers in a business, then there will likely be a large number of homogeneous cost pools associated with them. However, it can require a great deal of labor to determine the contents of these cost pools and then maintain them over time. Consequently, it is more common to reduce the number of cost pools, even though this may mean that their contents are not perfectly homogenous. This is less of an issue for smaller activity-based costing projects, where only a small number of costs are being examined, and so a higher level of accuracy can be used in constructing a small number of cost pools.