A driver is a factor having a direct impact on earnings. For example, adding an employee results in new costs to purchase office equipment for that person; therefore, an addition to headcount is a cost driver for office expenses. Other examples of drivers are:

  • A lawsuit could result in a major loss because of a court-ordered payment
  • The release of a new product could generate significant revenues and profits
  • The passage of environmental legislation could increase expenses to meet the requirements of the new law
  • Obtaining new debt financing at a lower interest rate should result in lower interest expenses

Related Courses

Cost Accounting Fundamentals 
Cost Management Guidebook