CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers
Which of the following is the most suitable cost driver for the cost pool 'material handling' in an activity based costing system?
The number of material movements or requisitions handled is the best driver for material handling cost, because handling effort and cost rise as more movements occur. Direct wages, selling price and building rent do not cause handling cost to change, so they are unsuitable.
- ANumber of material movements or requisitions handledCorrect
- BDirect labour wages paid
- CSelling price of the finished product
- DRent of the factory building
Explanation
A cost driver should have a cause and effect link with the activity cost. Material handling cost varies with the number of movements or requisitions handled. Wages, selling price and rent have no causal link to handling effort.
Did you get it right without looking?
One question tells you little. A timed set on Cost, Cost Centre, Cost Unit and Cost Drivers shows your real accuracy, how long you take and where you lose marks.
More Cost, Cost Centre, Cost Unit and Cost Drivers questions
- Which of the following statements about a cost object is correct?
- Which one of the following units of a company is most appropriately classified as a profit centre rather than a cost centre or investment ce…
- A Kolkata bus operator incurs a total operating cost of Rs 2,40,000 in a month. The fleet runs 4,000 km with an average of 30 passengers car…
- Which of the following is correctly classified as a personal cost centre?
- In a cost accounting system, a cost driver is best described as:
- In cost accounting, anything for which a separate measurement of cost is desired, such as a product, a service, a customer or a project, is …