What do you mean by cost, expense, cost pool, cost driver,
Definition of cost:
Cost refers to the monetary value of resources used or sacrificed to achieve a specific objective, such as producing goods or providing services. Costs can be classified into various categories, including direct costs and indirect costs.
Expense:
Definition: An expense is a specific type of cost that is incurred in the process of generating revenue. Expenses are typically associated with the day-to-day operations of a business and are deducted from revenue to calculate net income.
Cost Pool:
Definition: A cost pool is a grouping of similar costs within an organization. It involves aggregating costs that are related in terms of their nature or function. Cost pools are used in activity-based costing (ABC) to allocate overhead costs to products or services.
Cost Driver:
Definition: A cost driver is a factor that influences or causes changes in the total cost of an activity. In activity-based costing, cost drivers are used to allocate indirect costs to products or services based on the factors that drive those costs.
For example,
machine hours, labor hours, or the number of setups can be cost drivers.
In short:
Cost:
The monetary value of resources used to achieve an objective.
Expense:
A type of cost incurred in the process of generating revenue.
Cost Pool:
A grouping of similar costs within an organization.
Cost Driver:
A factor that influences changes in the total cost of an activity, used for allocating indirect costs in activity-based costing.