Appropriate cost-driver identification depends on:

A) a cause-and-effect relationship existing between the cost driver and costs of the activity.
B) the number of cost pools used.
C) homogeneity of cost pools.
D) the number of products produced or services provided.

Cost-Driver Identification

The process of determining the activities or factors that directly cause a cost to increase or decrease, important for accurate cost allocation.

Cause-And-Effect Relationship

The principle that an action (cause) results in a certain response or outcome (effect), often used in scientific and social studies.

Cost Pools

Groupings of individual costs typically according to function or department, allowing for more effective overhead cost allocation.