What Is the Role of Cost Drivers in an Activity-Based

question 55

Essay

What is the role of cost drivers in an activity-based cost (ABC)system? Explain how analysis of cost drivers can be useful in identifying inefficient activities and the cause(s)of the inefficiency?

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Definitions:

Month-to-Month Lease

A rental agreement that renews each month automatically until either the landlord or tenant decides to terminate it.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by the party to be charged, to prevent fraud and perjury in contractual agreements.

Oral

Referring to spoken words or agreements not recorded in writing, which may or may not be legally binding depending on the context.

Leading Object Rule

The Leading Object Rule is a legal principle that allows for oral modifications to a written contract if the modification serves a purpose primarily related to the object of the original contract.