*Basic

A cost driver is the direct cause of a cost.[1]

**Intermediate

Cost drivers follow a cause-effect relationship, and if the relationship cannot be established, then a company needs to find a more relevant cost driver.[2] Analysis means identifying all the possible cost drivers for a particular type of activity.[3]

***Advanced

Indirect costs lack proper causal relationship with a cost object, and so cost drivers are used to causally assign indirect costs to cost objects.[4]

Sources

[1] Editors (2021) Cost driver definition. Accounting Tools. Accountingtools.com
[2] Editors. Cost Driver. CFI. Corporatefinanceinstitute.com
[3] Thakur, M. Cost Drivers. Wall Street Mojo. Wallstreetmojo.com
[4]Toompuu,K; Polajeva, T (2013) Theoretical framework and an overview of the cost drivers that are applied in universities for allocating indirect costs. Procedia. p3