cost driver analysis - A technique to reduce costs

A cost driver is an element that causes cost to be incurred. The cost of most items can be modeled by a major cost driver. The item can then be looked at by its cost per cost driver.

For example, the cost driver of a casting would be its weight, so castings can be analyzed through their cost per pound.

In cases where cost drivers are difficult to identify, scattered diagrams can be used to plot the cost of parts within a category versus the values of their different characteristics.

The concept of cost drivers is very important to reduce costs as it is used to understand what affects cost the most and reduce it to the minimum required value.