Question

Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements​ is/are correct?

I.
A cost driver is a causal factor that increases the total cost of a cost object.
II.
Cost drivers may be volume based or activity based.
III.
Cost drivers are normally the largest cost in the manufacturing process.

Answer 1

Cost drivers are factors that cause the total cost of a cost object to increase. They can be volume-based or activity-based. They are not necessarily the largest cost in the manufacturing process.The correct answer is I.

Step-by-step explanation:

Cost drivers are factors that cause the total cost of a cost object to increase. Therefore, statement I is correct.

Cost drivers can be volume-based or activity-based. Volume-based cost drivers are related to the volume of production or sales, such as the number of units produced or sold.

Activity-based cost drivers are related to specific activities or processes, such as the number of machine hours or the number of customer orders. Therefore, statement II is correct.

Cost drivers are not necessarily the largest cost in the manufacturing process. The largest cost in the manufacturing process depends on the specific cost structure of the company. Therefore, statement III is incorrect.The correct answer is option I.