A cost driver causes a change in the cost of an activity and has an effect on costs.Managers
use cost drivers to allocate overhead costs to cost objects.

Question

Quizplus · Accepted Answer

This statement accurately describes the purpose and use of cost drivers in costing systems. Cost drivers are used to identify the activities that consume overhead resources, and allocating these costs to the relevant cost objects based on the volume or level of activity drivers. Therefore, cost drivers are critical in linking costs to activity levels and analyzing the cost behaviors of an organization's services, products, or processes.

A Cost Driver Causes a Change in the Cost of an Activity