Final answer:
A cost accounting system that assigns costs to cost objects only based on unit-based activity drivers is known as a traditional cost system.
Step-by-step explanation:
A cost accounting system that uses only unit-based activity drivers to assign costs to cost objects is referred to as a traditional cost system. This system typically allocates overhead costs to products based on a single measure of activity, such as direct labor hours or machine hours. Understanding the different ways in which costs can be measured is important for firms. For example, fixed costs are incurred before any production takes place and do not change with the level of output. In contrast, variable costs change with the level of output, and scaling up production typically leads to diminishing marginal returns, thus raising the marginal cost of producing additional units.
To provide insights into cost per unit of output, firms may use average cost, which is defined as the total cost divided by the quantity of output (AC = TC/Q), and marginal cost, which is the cost of producing one additional unit of output (MC = ∆TC/∆Q). These measures are crucial for making economic decisions about production and pricing. Therefore, the answer is a. traditional cost system.