Costs drivers can be based on either volume or activity.Which of the following is an activity based cost driver?
A)units of output.
B)time taken to set up machines.
C)labour hours.
D)machine hours.

Question

Quizplus · Accepted Answer

The time taken to set up machines is an activity-based cost driver because it is directly correlated with the cost of a specific activity, which in this case is the set-up of machines. Units of output, labour hours, and machine hours are volume-based cost drivers because they are based on the amount of production or usage, rather than a specific activity.

Costs Drivers Can Be Based on Either Volume or Activity