What Is a Cost Driver

question 91

Multiple Choice

What is a cost driver?

• A) It is the largest single category of cost in a company.
• B) It is a fixed cost that cannot be avoided.
• C) It is a factor that causes variations in a cost.
• D) It is an indirect cost that is essential to the business.

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Definitions:

Depreciation

The methodical distribution of the expense of a physical asset throughout its lifespan.

Payback Period

A financial metric that calculates the time required for an investment to generate cash flows sufficient to recover the initial investment cost.

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services, integral to the finished product.

Direct Labor

The labor costs directly associated with the production of goods or services, including wages of workers who are directly involved in manufacturing.