I 'Cost Driver' Is a Widely Used Term in Activity-Based

question 44

Essay

i. 'Cost driver' is a widely used term in activity-based costing. What is a cost driver? What is the cost driver in conventional cost volume profit (CVP) analysis? How is the cost driver measured in conventional CVP analysis?
ii. In activity-based costing, costs are classified into unit level, batch level, product level and facility level. How are these categories typically handled in CVP analysis, where there are only two categories available: fixed or variable?
iii. In an environment where activity-based costing is necessary and appropriate, is the relevance of conventional CVP analysis enhanced or diminished? Explain.
iv. Explain the additional limiting assumption of using CVP analysis under activity-based costing.

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Definitions:

Sensory Adaption

The process by which sensory receptors change their sensitivity to the stimulus, often diminishing in response to a constant stimulus.

Visual Information

Data perceived through the sense of sight, including colors, shapes, and movements, which is processed by the visual system.

Hemispheres

The two halves of the brain, the left and the right hemisphere, each responsible for different functions and processes.

Feature Detector

Neurons in the brain that identify specific features of a stimulus, such as shape, angle, or movement, which contribute to the perception of objects.