A Good Cost Driver Should Have a High Correlation with

question 41

Multiple Choice

A good cost driver should have a high correlation with

• A)the actual number of units produced.
• B)the actual consumption of overhead costs.
• C)the actual number of products produced.
• D)the actual consumption of direct costs.

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Definitions:

Conversion Costs

Costs specifically associated with converting raw materials into finished goods, which include labor and overhead.

Whole Units

The number of units in production during a period, whether completed or not.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for "First-In, First-Out."

Conversion Costs

The costs specifically associated with converting raw materials into finished goods, typically including direct labor and manufacturing overhead.