What is a Weighted Cost Driver?

A weighted cost driver is a factor that triggers the incurrence of overhead, which has been assigned more importance than is really the case. For example, all factory overhead could be allocated based on the amount of machine time used, even though other factors also trigger the incurrence of factory overhead. This situation can arise when the cost accountant does not want to track very many cost drivers, preferring instead to use a more simplified system.

The use of a weighted cost driver can be very cost-effective, since less data collection work is required. However, it can also yield misleading results, since it does not factor in the full range of cost drivers that are impacting overhead.