A cost driver
A)causes fixed costs to rise because of production changes.
B)has a direct cause-effect relationship to a cost.
C)can predict the cost behavior of a variable,but not a fixed,cost.
D)is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

Question

Quizplus · Accepted Answer

A cost driver is an activity or event that causes a cost to be incurred. It has a direct cause-and-effect relationship with a cost, so as the cost driver changes, the cost will change proportionally. Therefore, Option B is the best choice. Option A describes fixed costs, which are not affected by changes in production volume, so it is an incorrect statement. Option C is partially correct, as a cost driver can also help predict the cost behavior of a fixed cost. Option D is also incorrect, as it describes a specific type of cost (distribution costs) and is not a general definition of a cost driver.

A Cost Driver