Which of the following statements regarding activity-based cost drivers is correct?
A) Activity-based cost drivers are measures of activity that are directly associated with production.
B) Activity-based cost drivers are directly related to the volume of production.
C) Activity-based cost drivers improve the accuracy of direct cost allocations.
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

Activity-based cost drivers are not solely measures of activities directly associated with production or directly related to the volume of production. They are used in activity-based costing to allocate costs more accurately to products or services based on the activities that drive costs, rather than just on volume measures. This means they can include both production and non-production activities, improving the accuracy of cost allocations across a broader range of activities than direct costs alone.

Which of the Following Statements Regarding Activity-Based Cost Drivers Is