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By using Activity-Based-Costing, we can use a variety of cost drivers

23 / 01 / 2019 Others

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By using Activity-Based-Costing, we can use a variety of cost drivers, which would improve the accuracy, since each overhead cost pool has its own activity (driver that drives the cost). For example, in a large and complex manufacturing corporation, it would be impossible to use a single activity or to be driven by a single factor, such as the number of units produced or the number of labor hours or machine hours. 
Assume that variable manufacturing overhead is allocated using machine-hours. Give three possible reasons for a favorable variable overhead efficiency variance.


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