Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

Question

Quizplus · Accepted Answer

Managers should choose a cost driver that has a clear cause-and-effect relationship with the cost incurred. This means that changes in the cost driver should directly result in changes in the cost. By identifying the correct cost driver, managers can more accurately allocate costs and make better decisions about resource allocation.

Managers Should Look for Evidence of Cause-And-Effect When Choosing a Cost