Classify activities by level. (LO 3), AN William Mendel & Sons, Inc. is a small...
Classify activities by level.
(LO 3), AN William Mendel & Sons, Inc. is a small manufacturing company in La Jolla that uses activity-based costing. Mendel & Sons accumulates overhead in the following activity cost pools.
- 1.Hiring personnel.
- 2.Managing parts inventory.
- 3.Purchasing.
- 4.Testing prototypes.
- 5.Designing products.
- 6.Setting up equipment.
- 7.Training employees.
- 8.Inspecting machined parts after each setup.
- 9.Machining.
- 10.Assembling.
Instructions
For each activity cost pool, indicate whether the activity cost pool would be unit-level, batch-level, product-level, or facility-level.
Homework Answers
| Ans. | Activity Cost Pool | Activity Level | |
| 1.Hiring personnel. | Facility level activity | ||
| 2.Managing parts inventory. | Product level activity | ||
| 3.Purchasing. | Batch level activity | ||
| 4.Testing prototypes. | Product level activity | ||
| 5.Designing products. | Product level activity | ||
| 6.Setting up equipment. | Batch level activity | ||
| 7.Training employees. | Facility level activity | ||
| 8.Inspecting machined parts after each setup. | Unit level / Batch level activity | ||
| 9.Machining. | Unit level activity | ||
| 10.Assembling. | Unit level activity | ||
| Explanations: | |||
| Unit level activity is a volume-based cost driver (i.e. machine hours, direct labor hours etc.). | |||
| Product level activity is related to an entire product line (i.e. product modification). | |||
| Batch level activity is used in the allocation of overhead costs to production or service activities (i.e. System calibration). | |||
| Facility level activity is necessary for development (i.e. Insurance). | |||
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Classify activities by level.
(LO 3), AN William Mendel & Sons, Inc. is a small...
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