How a Company cans choose the Best Cost Driver? Give an explanation and an example.© BrainMass Inc. brainmass.com March 4, 2021, 11:09 pm ad1c9bdddf
Companies choose the best cost driver by selecting the activity that causes the cost of interest to rise and fall.
Usually firms have to select a cost driver to allocate overhead. If so, they examine the content and nature of overhead. Is it mainly the costs of owning, running and maintaining forklifts? If so, select forklift hours as the cost driver. Is it mainly hiring, training, ...
Your response is 228 words and gives examples for overhead cost drivers and cost drivers in retail and service settings. The main rule is also discussed so you can use it in any setting. Response is in everyday language suitable for novices.