Which of the following is an appropriate cost driver for electricity used for production equipment in a factory?
A) Machine hours
B) Number of inspections
C) Setup hours
D) Number of units

Question

Quizplus · Accepted Answer

Machine hours are a relevant cost driver for electricity used for production equipment in a factory because the more a machine is used, the more electricity it will consume. Thus, tracking machine hours can provide a more accurate allocation of the cost of electricity to specific products or departments. Inspections, setup hours, and number of units are not directly related to electricity usage and would not provide an appropriate allocation of electricity costs.

Which of the Following Is an Appropriate Cost Driver for Electricity