An allocation base that causes overhead costs to be incurred is called a(n):
A) revenue driver.
B) predetermined driver.
C) cost driver.
D) applied driver.

Question

Quizplus · Accepted Answer

A cost driver is the causal factor that determines the cost of an activity. It is used to allocate overhead costs to products or services based on the amount of the cost driver consumed by each product or service. Therefore, an allocation base that causes overhead costs to be incurred is a cost driver. The other choices are not correct definitions of this concept.

An Allocation Base That Causes Overhead Costs to Be Incurred