A factor having a "cause-and-effect" relationship with a cost object is called a(n):
A) cost driver.
B) allocation base.
C) direct cost.
D) indirect cost.

Question

Quizplus · Accepted Answer

A cost driver is a factor that has a cause-and-effect relationship with the cost object. It is used to assign indirect costs to cost objects. Therefore, cost driver is the best option among the given choices. Allocation base is also used to allocate costs, but it does not necessarily have a cause-and-effect relationship with the cost object. Direct and indirect costs are not related to cause-and-effect relationship.

A Factor Having a "Cause-And-Effect" Relationship with a Cost Object