Question

In performing an activity-based costing study for distribution costs, appropriate cost drivers for preparing orders for shipment would include all of the following except the:

	A.	Number of orders shipped.
	B.	Time spent packing orders.
	C.	Time devoted to selling each product.
	D.	Number of items per order.

Answer 1

Activity-Based Costing is one of the costing methods that identifies activities in an organisation and assigns the cost of each activity, in the process of production of goods and services, as per their respective usage.

In shipment,  the key event is a customer order and related activities and relevant costs that reflect the work required to fulfill the order.

In performing an activity-based costing study for distribution costs, appropriate cost drivers for preparing orders for shipment would include

• number of orders shipped
• time devoted to selling each product
• number of items per order

and does not include : time spent in packing orders