cost driver

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In a system of activity-based costing, any factor such as number of units, number of transactions, or duration of transactions that drives the costs arising from a particular activity. When such factors can be clearly identified and measured, they will be used as a basis for allocating costs to cost objects. The term cost driver is therefore effectively synonymous with both activity measure and allocation base and the literature often uses them interchangeably. See also activity cost pool; cost allocation.

Subjects: Accounting.

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