ECONOMICS

Detailed explanation-1: -Examples of cost drivers are direct labor hours worked, the number of customer contacts made, the number of engineering change orders issued, the number of machine hours used, and the number of product returns from customers.

Detailed explanation-2: -There are 3 types of cost drivers: Volume Drivers, Unit Price Drivers, and Fixed Cost Drivers (Overhead).

Detailed explanation-3: -A cost driver is the direct cause of a cost and its effect is on the total cost incurred. For example, if you are to determine the amount of electricity consumed in a particular period, the number of units consumed determines the total bill for electricity.

Detailed explanation-4: -A cost driver is any activity that triggers a cost of something else. An example of this could be how the amount of water your office uses in a month determines the price of your water bill. The units of water are the cost drivers, and the water bill is the cost.