Question

Cost drivers are:

A. activities that cause costs to increase as the activity increases.
B. accounting techniques and practices used to control costs.
C. accounting reimbursements used to evaluate whether performance is proceeding according to plan.
D. costs linked to two or more other costs.

Answer 1

Answer: A. activities that cause costs to increase as the activity increases.

Explanation: Cost drivers activities that cause costs to increase as the activity increases such as units of electricity on the total cost of electricity. Costs are the main determinants of the continuity of businesses. So long the costs of production are kept low, lower than revenue, then there is profit and probability of expansion, otherwise, the business faces risk of shutting down.