ACCA PM · Chapter 2 · Question 5 of 9
In activity-based costing, what is a cost driver?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The factor that causes the cost of an activity to change
Explanation
A cost driver is any factor whose change causes a change in the total cost of an activity, such as the number of set-ups driving set-up costs. It is not the same as a direct cost or a cost centre, and ABC deliberately avoids relying on a single labour-hour based rate.
More Activity-based costing MCQs
- Q7Which of the following costs is most likely to be driven by the number of production batches rather than the number of units produced?
- Q8Quality inspection costs are budgeted at $90,000 for the year, with 600 inspections expected. Product Z will be produced in a run of 2,500…
- Q9Which of the following is a recognised limitation of activity-based costing?
- Q1Delta Co makes two products, X and Y. Budgeted overheads are: machine set-ups $120,000; materials handling $80,000; machining $200,000…
- Q2Delta Co makes two products, X and Y. Budgeted overheads are: machine set-ups $120,000; materials handling $80,000; machining $200,000…