The type of relationship stating "how changes in cost driver drives cause changes in cost" will be termed as ___________?
Correct answer: D. economic plausibility
- A. marginal plausibility
- B. market plausibility
- C. financial plausibility
- D. economic plausibility
Explanation
Economic plausibility asks whether the estimated cost relationship makes economic sense, such as whether a cost driver logically causes changes in cost. The other forms of plausibility are not standard terms in cost-driver analysis.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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