production driver
cost driver
price driver
estimation driver
Answer is Right!
Answer is Wrong!
The correct answer is: B. cost driver
A cost driver is a factor that causes a change in the total cost of a product or service. It is a variable that can be used to measure the cause and effect relationship between change in total cost level and change in level of activity.
There are two types of cost drivers:
- Unit-level cost drivers: These are cost drivers that are directly proportional to the number of units produced or sold. For example, the cost of direct materials is a unit-level cost driver because it increases in direct proportion to the number of units produced.
- Non-unit-level cost drivers: These are cost drivers that are not directly proportional to the number of units produced or sold. For example, the cost of supervision is a non-unit-level cost driver because it does not increase in direct proportion to the number of units produced.
Cost drivers are important because they can be used to allocate costs to products or services. This is important for determining the profitability of products or services.
The other options are incorrect because:
- A production driver is a factor that causes a change in the level of production. For example, the number of units produced is a production driver.
- A price driver is a factor that causes a change in the price of a product or service. For example, the cost of raw materials is a price driver.
- An estimation driver is a factor that is used to estimate the cost of a product or service. For example, the number of hours worked is an estimation driver.