Question

Which of the following should have the strongest cause and effect relationship with overhead costs? Non-value-added costs. Cost drivers. Value-added costs. Cost followers. Units of output.

Answer 1

Cost drivers

Step-by-step explanation:

Cost drivers have the strongest cause and effect relationship with overhead costs. A cost driver is the factor that is generating the change in the cost of an activity.

Cost Driver can be defined as the direct generator of an overhead cost.

Activity based costing is a costing technique that allocates overhead costs to products or services in a more logical manner than traditional accounting approaches that simply allocates cost. It is the use of cost drivers that makes activity based costing a more logical method