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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

Which of the following is the most appropriate cost driver for the cost pool of 'material handling' in a factory?

The most appropriate cost driver for material handling is the number of material movements. Handling cost rises and falls with how often materials are moved, so this shows a direct cause-and-effect link. Wages, selling price or customers invoiced do not drive that activity.

  1. ANumber of material movementsCorrect
  2. BDirect labour wages paid
  3. CSelling price per unit
  4. DNumber of customers invoiced

Explanation

Material handling cost varies with the number of times materials are moved, so number of material movements has a cause-and-effect relationship with it. Wages, selling price and invoicing do not cause handling cost to change.

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