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Identify some common activity cost drivers that might be used to state a volume of activity...

Identify some common activity cost drivers that might be used to state a volume of activity in a manufacturing company. What general criterion might be used in choosing a cost driver?
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Answer #1

Direct labor hour, machine hours, number of orders, number of customer contacts, number of product returns, machine setups and number of inspections are the most commonly used cost drivers in a manufacturing company. Among these direct labour hour is the most commonly used cost driver by manufacturing companies.

Cost drivers should be selected based on the impact of the cost driver on the cost object. We should obtain the most accurate cost of the cost object. To understand a cost driver easily we must investigate its relationship with indirect costs. There should be a sufficient number of cost drivers to reflect the uniqueness of a cost object that consumes each activity cost.

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