ECONOMICS

Detailed explanation-1: -1) False A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes overhead costs but not direct costs 2) True Job-order costing systems often use allocation bases that do not reflect how job…

Detailed explanation-2: -A cost driver is a factor that creates or drives the cost of the activity. It is the root cause of why a particular cost occurred. Activities consume resources while customers, products, and channels of production consume activities. Understanding this is fundamental to the cost allocation concept using cost drivers.

Detailed explanation-3: -Cost drivers are defined as a unit of activity that causes a business to endure costs. For example, machine hours are an activity that cause costs such as machine maintenance and electricity costs. Cost drivers are often used as an allocation base to allocate overhead among products.

Detailed explanation-4: -A cost driver triggers a change in the cost of an activity. The concept is most commonly used to assign overhead costs to the number of produced units. It can also be used in activity-based costing analysis to determine the causes of overhead, which can be used to minimize overhead costs.

Detailed explanation-5: -More technical cost drivers are machine hours, the number of engineering change orders, the number of customer contacts, the number of product returns, the machine setups required for production, or the number of inspections.