Question

What are the three Cost Drivers for the following two activities:

1). Materials Purchased.

2). Customer Service.

Please explain your answer.

Answer 1

Cost drivers are activity units which helps to assign the cost to various activities in the organisation.

1) Material Purchased : for Material purchases, there is primarility only one cost driver i.e. No of Purchase orders created

2) Customer Service : : For customer service cost drivers can be No of service calls attended, No of Hours spent for servicing, No Service staff in service department etc.

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