Which of the Following Statements Regarding Activity-Based Cost Drivers Is

question 114

Multiple Choice

Which of the following statements regarding activity-based cost drivers is correct?

• A) Activity-based cost drivers are measures of activity that are directly associated with production.
• B) Activity-based cost drivers are directly related to the volume of production.
• C) Activity-based cost drivers improve the accuracy of direct cost allocations.
• D) None of these answers are correct.

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Definitions:

Cost Factor

A numerical figure that represents the cost of a specific element of production or service, used in calculating the total cost.

Financing Receivables

The process of selling accounts receivable to a third party to improve cash flow and reduce risk.

Probability of Nonpayment

The likelihood or risk that a borrower will not be able to make the scheduled payments on their debt obligations.

Revenue

The total income generated by a company from its business activities before any expenses are subtracted.