Appropriate cost-driver identification depends on:
A) a cause-and-effect relationship existing between the cost driver and costs of the activity.
B) the number of cost pools used.
C) homogeneity of cost pools.
D) the number of products produced or services provided.

Question

Quizplus · Accepted Answer

Appropriate cost-driver identification depends on a cause-and-effect relationship existing between the cost driver and costs of the activity. In other words, the cost driver should be the factor that influences or causes the costs of the activity to change. Homogeneity of cost pools and the number of products or services provided may be relevant factors in determining appropriate cost drivers but are not the most important factors. The number of cost pools used is not necessarily relevant to identifying appropriate cost drivers.

Appropriate Cost-Driver Identification Depends On