Cost Drivers

This video discusses cost drivers. A cost driver is an activity that causes costs to occur. Machine hours, direct labor hours, units produced, the number of employees-- all of these things could potentially be a cost driver. If a change in the activity level (e.g., an increase in the number of sandwiches made by a restaurant) leads to a change in costs (e.g., an increase in the cost of bread for the restaurant), then the activity is a cost driver. Thus, there is a cause-and-effect relationship between the activity and costs. Some companies use a single cost driver to allocate manufacturing overhead. However, companies often have many cost drivers. Activity-based Costing was developed in the 1980's to better measure costs by taking multiple cost drivers into consideration. — Edspira is the creation of Michael McLaughlin, who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people. — SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS & OTHER FREE GUIDES * http://eepurl.com/dIaa5z — MICHAEL’S STORY * https://www.edspira.com/about/ — LISTEN TO THE SCHEME PODCAST * Apple Podcasts: https://podcasts.apple.com/us/podcast/scheme/id1522352725 * Spotify: https://open.spotify.com/show/4WaNTqVFxISHlgcSWNT1kc * Website: https://www.edspira.com/podcast-2/ — CONNECT WITH EDSPIRA * Website: https://www.edspira.com * Instagram: https://www.instagram.com/edspiradotcom * LinkedIn: https://www.linkedin.com/company/edspira * Facebook: https://www.facebook.com/Edspira * Reddit: https://www.reddit.com/r/edspira *TikTok: https://www.tiktok.com/@edspira — CONNECT WITH MICHAEL * LinkedIn: https://www.linkedin.com/in/prof-michael-mclaughlin * Twitter: https://www.twitter.com/Prof_McLaughlin * Instagram: https://www.instagram.com/prof_mclaughlin * Snapchat: https://www.snapchat.com/add/prof_mclaughlin *TikTok: https://www.tiktok.com/@prof_mclaughlin — HIRE MCLAUGHLIN CPA * Website: http://www.MichaelMcLaughlin.com/hire-me