In Activity-Based Costing,how Are Cost Drivers Selected

question 105

Essay

In activity-based costing,how are cost drivers selected?

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Definitions:

Claret

A red wine from Bordeaux, France, or a wine of similar character from elsewhere.

Demand Function

A mathematical representation of the relationship between the quantity demanded of a good and its determining factors, such as price and consumer income.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less expensive ones.

Income

Beneficial returns gained from employment or investment opportunities, typically on a scheduled basis.