Final answer:
A cost driver is a factor that leads to a change in the cost of an activity or project and is essential for effective cost management in businesses.
Step-by-step explanation:
A factor that causes or leads to change in a cost or activity is known as a cost driver. Cost drivers are variables that can increase or decrease the total cost of a project or activity, depending on how they change.
Understanding cost drivers is crucial for businesses to manage costs effectively and make informed financial decisions. Some common examples of cost drivers include production volume, machine hours, and labor hours.