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Author Question: How are cost drivers selected in activity-based costing systems? What will be an ideal ... (Read 89 times)

V@ndy87

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on: Jul 5, 2018
How are cost drivers selected in activity-based costing systems?
 
  What will be an ideal response?

Question 2

In drawing a context diagram, we should include:
 a. only exception routines
  b. only error routines
  c. only normal processing routines
  d. only normal processing and exception routines


meryzewe

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Reply #1 on: Jul 5, 2018
Answer to Question 1

Answer: First, indirect costs are divided into homogeneous cost pools and classified as output unit-level, batch-level, product-sustaining, or facility-sustaining costs. The cost pools correspond to activities. Costs are allocated to products, services, or customers using activity drivers or cost-allocation bases that have a cause-and-effect relationship with each cost pool.

Choices about how to economize on the number of activity-cost drivers, how to isolate events (because activities triggered by the same event often can use the same activity cost driver), and which cost drivers to select are influenced by the fact that the benefit of obtaining cost driver information needs to exceed implementation costs.

Answer to Question 2

C


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