In business, it is vital to find the cost of the product, to identify whether the business can make the required profits from producing those products.

This system is basically to compute the product cost Product Cost Product cost refers to all those costs which are incurred by the company in order to create the product of the company or deliver the services to the customers and the same is shown in the financial statement of the company for the period in which they become the part of the cost of the goods that are sold by the company. read more are allocated on the predefined rate based on the activity performed. These are the necessary expenditures and can be fixed or variable in nature like the office expenses, administration, sales promotion expense, etc. As per traditional accounting, the manufacturing and indirect costs Indirect Costs Indirect cost is the cost that cannot be directly attributed to the production. It measures, records and analyzes both fixed and variable costs for this purpose. There are many types of cost drivers in cost accounting Cost Accounting Cost accounting is a defined stream of managerial accounting used for ascertaining the overall cost of production. Source: Cost Drivers () Types of Cost Drivers You are free to use this image on your website, templates, etc., Please provide us with an attribution link How to Provide Attribution? Article Link to be Hyperlinked

read more is just a way to prove the relationship. It should be understood that correlation Correlation Correlation is a statistical measure between two variables that is defined as a change in one variable corresponding to a change in the other. Its analysis means identifying all the possible cost drivers for a particular type of activity or cost etc., and explains their cause and effect relationship with the event. It is the cause and the cost incurred in its effect. The cost driver is that variable or factor which has an effect and causes the relationship with the total cost.

Difference Between Cost Drivers and Cost Objects.

Example Of Cost Pools And Cost Drivers