For each of the following activities, select the most appropriate cost driver.
For each of the following activities, select the most appropriate cost driver.
Each cost driver may be used only once.
| Activity | Cost Driver |
|---|---|
| 1. Pay vendors | Answer |
| 2. Evaluate vendors | Answer |
| 3. Inspect raw materials | Answer |
| 4. Plan for purchases of raw materials | Answer |
| 5. Packaging | Answer |
| 6. Supervision | Answer |
| 7. Employee training | Answer |
| 8. Clean tables | Answer |
| 9. Machine maintenance | Answer |
| 10. Move in-process product from one work station to the next | Answer |
The activity based costing identifies the cost of each activity, pools the costs under that activity and identifies a driver based on which the cost of that activity can be allocated. Cost driver are the reason the cost has incurred. They are what drives the cost.
Cost drivers are basically the activities which are carried out for the production of goods or services and such activities need resources which is the reason of the cost.
Thus identifying a cost driver is like identifying the cost and effect relationship and with an indepth analysis the same can be derived.
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