Factors in selecting cost drivers

Three important factors in selecting cost drivers for an ABC system are as follows: (a) Degree of correlation between consumption of an activity and consumption of the cost driver. (b) Cost of measurement of the cost driver. In accounting, the cost driver definition is a factor that incurs cost. Use cost drivers to allocate variable and indirect costs to production activities or output. Include both indirect costs and direct costs to compute the full cost of production. Because indirect costs, such as variable overhead, are not directly traceable to production activities, allocate them according to a cost driver rate .

Number of employees. Number of customer orders. Number of customer online orders. The more accurately a company can determine the cost drivers for its products, the more accurate the costing information will be, which in turn allows management to make better use of the cost data in making decisions. As technology changes, however, the mix between materials, labor, and overhead changes. Managerial Accounting (9th Edition) Edit edition Solutions for Chapter 5 Problem 11RQ: List three factors that are important in selecting cost drivers for an ABC system. . Cost per set-up. Total set-up cost = $, Total number of set-ups = Cost per set-up = ,/ = $1, Set-up cost associated with product A = 1, x 20 = $20, Set-up cost associated with product B = 1, x 30 = $30, Set-up cost associated with product C = 1, x

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