Question

Gandalf and Company makes table tennis equipment for the retailers around the world.  Below you will find a number of activities and cost at Gandalf Corporation. Please list the activity as either, “Batch”, “Unit”, "Product" or “Organization-sustaining”.

Activity	Level
Factory utilities
A steering wheel is installed in a golf cart.
Machine set-up.
Completed golf carts are individually tested on the company’s test track.
Molding and sanding each unit of product
An outside lawyer draws up a new generic sales contract for the company, limiting Go Pro’s liability in case of accidents that involve its golf carts.
Electricity is used to heat and light the factory and the administrative offices.
A golf cart is painted. cost hierarchy often used to implement ABC, with the exception of
Research and development
The company’s engineer modifies the design of a model to eliminate a potential safety problem.

Answer 1

Solution:

1	Organization – sustaining
2	Unit level
3	Batch level activity
4	Batch level
5	Unit level
6	Organization – sustaining
7	Organization – sustaining
8	Unit level
9	Product-level
10	Product-level

Explanation:

Unit level Activity refers to activities performed for units individually. Example: Steering wheel installation in a golf cart; Sanding and molding each unit

Batch level activity refers to activities performed each time a batch of products are processed. Example: Machine set-up

Product level activities refer to activities specified to the specific product. Example: Research and development

Organization sustaining activities refer to activities carried out regardless of the good and the customer. Example: Factory utilities

Customer level activity refer to activities carried out to support the customers irrespective of the good