Which of the following is the most appropriate cost driver for the activity 'machine maintenance' in a manufacturing company?

• A. Number of machine hours used
• B. Number of units sold
• C. Number of customer orders
• D. Direct labor hours

Answer: (A)

Verified step by step guidance

1. Understand the concept of a cost driver: A cost driver is a factor that causes a change in the cost of an activity. It is used in activity-based costing to allocate costs to products or services based on their usage of the activity.
2. Analyze the activity 'machine maintenance': Machine maintenance is directly related to the operation and usage of machines in the manufacturing process. The more the machines are used, the more maintenance they are likely to require.
3. Evaluate the options provided: Consider each option and its relevance to machine maintenance. For example, 'Number of machine hours used' directly correlates with machine usage, while 'Number of units sold,' 'Number of customer orders,' and 'Direct labor hours' are not directly related to machine maintenance.
4. Determine the most appropriate cost driver: Since machine maintenance is influenced by the extent of machine usage, the 'Number of machine hours used' is the most logical and appropriate cost driver for this activity.
5. Conclude the reasoning: The 'Number of machine hours used' is the best choice because it directly measures the factor that drives the cost of machine maintenance, ensuring accurate cost allocation in activity-based costing.