Question

7. What is the primary trade-off that an accountant must consider when deciding whether to identify cost drivers?

Is the cost/benefit of the process reasonable for more accurate cost behavior obtained.

Will the cost driver identification provide different costs for different purposes.

Will material related drivers be more accurate than labor-related drivers.

Will the cost relationship be to complex to understand.

There is no trade-off to consider using cost drivers.

Answer 1

Correct answer:

Option(1) is correct statement that is the cost/benefit of the process reasonable for more accurate cost behavior obtained. Under the primary trade off  the accountant primarily must first check cost benefit behavior to get more accurate cost behavior before considering other cost behaviors.

Incorrect Answers:

Option(2) is incorrect statement because under the primary trade off, the accountant should not consider the cost driver identification to provide different costs for different purposes.

Option(3) is incorrect statement because under the primary trade off, the account is not considering any material related drivers be more accurate than labor-related drivers.

Option(4) is incorrect statement because under the primary trade off. the accountant does not considers that the cost relationship be to complex to understand.

Option(5) is incorrect statement because the primary trade off considers using the cost drivers.

So correct answer is option (1)