A basis for allocating the cost of a resource to an activity cost pool or allocating the cost of an activity cost pool to a cost object is a(n):
A) Direct factor.
B) Indirect factor.
C) Cost driver.
D) Joint cost.
E) Opportunity cost.

Question

Quizplus · Accepted Answer

A cost driver is the primary factor that causes a cost to be incurred or a resource to be consumed. Cost drivers are used to assign or allocate costs to a particular cost pool or cost object, making it easier to track and manage the costs associated with specific activities. Therefore, a cost driver is a basis for allocating the cost of a resource to an activity cost pool or allocating the cost of an activity cost pool to a cost object.

A Basis for Allocating the Cost of a Resource to an Activity