Question

explain the important factors for selecting the cost drivers in ABC with examples

Answer 1

Factors for selecting activity cost drivers are as follows;

1. You need to determine the cost of the object this to ensure better distribution of the cost of a target.

2. You need to investigate the important cost drivers to ensure the relationship between the specified activity and the cost incurred.

3. Management control effect  

Answer 2

Activity based Costing or ABC is the cost drivers are the important factors which contributes to the various cost heads like labor, maintenance and so on.  

It is generally used to distribute the total overhead costs to the produced units in a given time.  

The factors, which are responsible for selecting the cost drivers, are, labor hours used, machine hours, customer contacts, quantity of goods returned and so on.