To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Question

Quizplus · Accepted Answer

This statement is true. The cost driver should be the factor or variable that causally affects the costs in the activity cost pool. If there is a high degree of correlation, it means that the cost driver is a good representation of the actual consumption of the activity cost pool, which leads to accurate costing.

To Achieve Accurate Costing, a High Degree of Correlation Must