Question

FixIt, Inc. operates 20 injection molding machines in the production of tool boxes of four different sizes, named the Apprentice, the Handyman, the Journeyman, and the Professional. Classify each of the following costs as unit-level, batch-level, product-level, or facility-level. Activity Cost Level (a) First-shift supervisor’s salary. select an option (b) Powdered raw plastic. select an option (c) Dies for casting plastic components. select an option (d) Depreciation on injection molding machines (assume units-of-activity depreciation). select an option (e) Changing dies on machines. select an option (f) Moving components to assembly department. select an option (g) Engineering design. select an option (h) Employee health and medical insurance coverage.

Answer 1

Answer:

(a) Facility-level: First-shift supervisor’s salary.

(b) Unit-level: Powdered raw plastic.

(c) Product-level: Dies for casting plastic components.

(d) Unit-level: Depreciation on injection molding machines (assume units-of-activity depreciation).

(e) Batch-level: Changing dies on machines.

(f) Batch-level: Moving components to assembly department.

(g) Product-level: Engineering design.

(h) Facility-level: Employee health and medical insurance coverage.

Explanation:

In an Activity Based Costing (ABC), costs are grouped into four (4) categories according to the cost driver utilized. These are namely;

1. Facility-level costs: any cost of activity, that isn't tied to individual products and services but are utilized for the running of the company in general.

2. Batch-level cost: all costs of activity associated with a group of products and services.

3. Product-level cost: all costs of activity associated with individual products and services, irrespective of the batches or units produced.

4. Unit-level cost: is the total expenditure associated with producing an individual unit of product and service.