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Activity-based costing uses the term ‘cost driver’. What is this? (a) An instruction from management to reduce operating costs. (b) An activity which generates a cost. (c) A fixed overhead absorption technique. (d) A convenient point in a costing system for the collection of costs.
(b) An activity which generates a cost.
B is a right Answer
An activity which generates a cost.
(c) A fixed overhead absorption technique.
(b) An activity which generates a cost.In ABC Costs are traced to products through activities which consumes the resources and these activities and resources uses cost drivers to attach costs to cost objects
cost driver is any factor which causes a change in the cost of an activity. A cost driver is the unit of an activity that causes the change in activity's cost.
B is the right answer
B is correct, not C
"B" is the right number
Number B is the right answerb) An activity which generates a cost.
Option (B) is the right answer
(b) An activity which generates a cost.
Activity cost drivers are associated with the managerial accounting concept of activity based costing where job activities are divided in to cost pools based on their cost driver in an effort to properly allocate indirect costs to products based on the amount of activities required to produce them. The cost driver can be anything in the pool that causes the cost of the activities to increase or decrease.
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