Question

Explain what is meant by an activity measure. Identify an appropriate activity measure for analyzing the cost structure of the book donations department within the university’s library. Justify your answer. Is the activity measure you identified a true cost driver? Explain

Answer 1

Answer:

Explanation:

• ACTIVITY MEASURE: A measure of the amount of activity that drives the costs in an activity cost pool

• It is a quantitative measure of how much activity is performed, such as number of books processed.

• A COST DRIVER: is an activity that causes the total cost to change.

• In this case the NUMBER OF BOOKS PROCESSED can be a cost driver

• Since the salary, stipend, and facility costs are essentially fixed that means the number of books processed is not a true cost driver for those costs.

• However, the number of books processed does drive the total cost for the RFID tags and would be considered a true cost driver for this cost.

Answer 2

Answer:

Refer below for the explanation.

Explanation:

-Activity Measure Definition: A portion base in a movement based costing framework; in a perfect world, a proportion of the measure of action that drives the expenses in an action cost pool, hence its a quantitive measure.

-An event that occurs the total cost to change is called cost driver.

-Number of books can be a cost driver.