Green Lumber Supply noticed a recent decline in the amount of purchases from a key customer.Worried that other customers might also reduce their purchases,Green's management decided to evaluate the cost of its delivery service.Which of the following cost drivers is more appropriate for general administrative costs of the Delivery Department?
A)Number of different items ordered.
B)Value of each order.
C)Total number of items in each order.
D)Number of deliveries made.

Question

Quizplus · Accepted Answer

The number of deliveries made is a better cost driver for the general administrative costs of the Delivery Department as it directly measures the activity of the department. The other options are more appropriate for other cost drivers, such as inventory or purchasing costs.

Green Lumber Supply Noticed a Recent Decline in the Amount