The managers of Financial Burden Ltd are analysing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the:
A) Current tax rate for employees
B) Total number of deductions from an individual employee's pay
C) Number of pay periods each month
D) Number of employees

Question

Quizplus · Accepted Answer

The most appropriate cost driver for the payroll processing cost pool is the number of employees. This is because the effort and resources required for payroll processing typically scale with the number of employees, making it a direct and relevant basis for allocating these costs.

The Managers of Financial Burden Ltd Are Analysing Some of Their