Which of the following is an appropriate cost driver for issuance of purchase orders?
A) Number of units
B) Number of purchase orders
C) Number of setups
D) Either number of units or number of purchase orders would be appropriate

Question

Quizplus · Accepted Answer

The appropriate cost driver for issuance of purchase orders is number of purchase orders. This is because the cost of issuing a purchase order is directly proportional to the number of purchase orders issued. The more purchase orders that need to be processed, the more time and resources will be required to issue them, resulting in higher costs. Therefore, the number of purchase orders is the best cost driver for this activity.

Which of the Following Is an Appropriate Cost Driver for Issuance