CAF-5 · Chapter 3 · Question 8 of 10
When applying Activity-Based Costing, which cost driver should logically be used to assign "Machine set-up costs" to various products?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Total number of batches or set-ups
Explanation
Machine set-up costs are incurred every time a machine is prepared for a new batch of production, regardless of how many units are in that batch. Therefore, the "Total number of batches" or "set-ups" is the correct driver.
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