When a company is choosing between different types of volume based cost drivers, which of the following factors suggest the use of outputs as a cost driver?
i. The company has only one product.
ii. The company is labour intensive.
iii. The company uses large quantities of direct materials.
A) i
B) i and iii
C) ii
D) ii and iii

Question

Quizplus · Accepted Answer

When a company has only one product, using outputs as a cost driver is straightforward and effective because the production volume directly correlates with costs. Labor intensity or the quantity of direct materials doesn't necessarily suggest outputs as the best cost driver.

When a Company Is Choosing Between Different Types of Volume