What is an activity base?
A) It is the largest single category of cost in a company.
B) It is a fixed cost that cannot be avoided.
C) It is a measure of whatever causes a variable cost to be incurred
D) It is an indirect cost that is essential to the business.

Question

Quizplus · Accepted Answer

An activity base is a measure of whatever causes a variable cost to be incurred. It is also known as a cost driver, which identifies and measures the factors that incur costs in a company's operations. Examples of activity bases include machine hours, labor hours, and units produced. Therefore, option C is the best choice. Options A, B, and D do not accurately describe what an activity base is.

What Is an Activity Base