Question

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

a) Number of units produced
b) Total revenue
c) Number of warranty claims
d) Employee salaries

Answer 1

The most appropriate cost driver for allocating the cost of warranty services is the number of warranty claims.

Step-by-step explanation:

The most appropriate cost driver for allocating the cost of warranty services is number of warranty claims.

The cost of warranty services is directly related to the number of claims made by customers. The more warranty claims, the higher the cost of providing the warranty services.

Allocating the cost based on the number of warranty claims ensures that the expenses are assigned to the products or services that require warranty support.