Final answer:
A cost-benefit analysis is crucial for Lake City Kayak Company to identify the most effective cost driver for manufacturing different styles of kayaks, ensuring proper allocation of costs based on resource consumption.
Step-by-step explanation:
To determine the best cost driver for each activity at Lake City Kayak Company, a cost-benefit analysis will be useful.
This analysis helps in understanding which cost driver is most effective at allocating costs based on the actual consumption of resources by different activities or products.
Like selecting a raft based on color or size, companies must choose cost drivers based on relevant factors.
The objective is to find the most suitable cost driver that reflects the use of resources for manufacturing the three styles of kayaks, ensuring transparent and accurate cost allocation.
This could be based on the number of labor hours, the amount of material used, or any other measurable factor that causes costs to occur.