The cost driver chosen for applying factory-overhead costs should be the cost driver that _____.
A)is easiest to understand
B)incurs the least administration cost
C)causes most of the overhead costs
D)confers a competitive advantage

Question

Quizplus · Accepted Answer

The cost driver chosen for applying factory-overhead costs should be the cost driver that causes most of the overhead costs. This will ensure that the allocation of overhead costs is more accurate and reflective of the activities that actually caused those costs. Easiest to understand and least administration cost are not the most important factors when choosing a cost driver. Conferring a competitive advantage is also not a relevant factor in this context.

The Cost Driver Chosen for Applying Factory-Overhead Costs Should Be