For an activity base to be useful in cost behavior analysis
A) the activity should always be stated in dollars.
B) there should be a correlation between changes in the level of activity and changes in costs.
C) the activity should always be stated in terms of units.
D) the activity level should be constant over a period of time.

Question

Quizplus · Accepted Answer

A useful activity base should have a correlation with changes in costs. This means that as the level of activity changes, the cost should also change accordingly. Stating the activity in dollars or units is not necessary as long as there is a clear correlation between the activity base and the cost behavior. A constant activity level is also not necessary, as long as there is a consistent relationship between changes in the activity base and changes in costs.

For an Activity Base to Be Useful in Cost Behavior