Question :

Identify an appropriate cost driver for tracing costs related with the various levels of activities to the next cost objective or products, whichever is appropriate.

Glaser Health Products is interested in using activity-based costing to recognize as many costs as possible with the products. These costs can be used for control and planning decisions rather than for inventory valuation. The controller decided that all operation costs may be related to products but only those sales and administrative costs that are classified as unit-level, product-level or batch-level costs could be related to products. Using preliminary stage cost drivers, describe how individual items of costs will be traced to activity groupings.

1. Using primary stage cost drivers, show how the costs could be related to products.

2. Describe why it is essential to use preliminary stage and primary stage cost drivers