Question

Which would be an appropriate cost driver for the purchasing activity cost pool? purchase orders machine setups machine hours inspections

Answer 1

The Purchase orders would be an appropriate cost driver for the purchasing activity cost pool.

A purchase order, which specifies kinds, quantities, and agreed-upon pricing for goods or services, is a business document and the first formal offer made by a buyer to a supplier. It is employed to regulate the acquisition of goods and services from outside providers.

An element that generates or influences an activity's cost is known as a cost driver. It is the main reason that a certain expenditure happened. Customers, products, and manufacturing channels all use resources, but activities use resources. The idea of cost allocation utilising cost drivers is fundamentally based on an understanding of this.

The complete question is:

Which would be an appropriate cost driver for the purchasing activity cost pool?

A) Purchase orders

B) Machine setups

C) Machine hours

D) Inspections

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