Which of the following would be the most appropriate activity and cost drivers pairing for a Purchasing Department?
A) Activity: Placing orders - Possible Cost Driver: Number of orders
B) Activity: Placing orders - Possible Cost Driver: Number of new hires
C) Activity: Placing orders - Possible Cost Driver: Frequency of audits
D) Activity: Placing orders - Possible Cost Driver: Employee turnover rate

Question

Quizplus · Accepted Answer

The most appropriate cost driver for the activity of placing orders in a Purchasing Department would be the number of orders. This is because the more orders a department places, the more resources are needed to fulfill those orders, such as labor costs associated with processing orders, purchase order supplies, and potential shipping costs. Therefore, the 'Number of orders' is the most suitable cost driver in this scenario.

B, C, and D are not suitable cost drivers for the activity of placing orders. The number of new hires would likely relate to recruitment or training costs, while the frequency of audits would relate more to compliance or risk management costs, and employee turnover rate would likely relate to employee training, recruitment and retention costs.

Which of the Following Would Be the Most Appropriate Activity