Which of the following statements is true regarding a cost driver?
A) Once a particular cost driver has been used for an activity, it may not be used again.
B) Employees should never be made aware of the cost drivers for their department.
C) There may be more than one potential cost driver for a particular activity.
D) Choosing the wrong cost driver should not impact the determination of a product's cost.

Question

Quizplus · Accepted Answer

There may be more than one potential cost driver for a particular activity. Cost drivers are the activities or factors that cause costs to vary. There may be more than one factor that influences the cost of an activity and therefore, multiple cost drivers can be used to accurately allocate costs to a product or service. Option A is incorrect because cost drivers can be used repeatedly to allocate cost to different activities. Option B is incorrect because employees should be aware of the cost drivers as it will help them understand how the costs are allocated in their department. Option D is incorrect because choosing the wrong cost driver can lead to incorrect product cost determination.

Which of the Following Statements Is True Regarding a Cost