Classification of Activity Levels

Classification of Activity Levels - 3 Product-level...

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CLASSIFICATION OF ACTIVITY LEVELS As mentioned earlier, traditional costing systems are volume-driven—driven by unit-based cost  drivers such as direct labor or machine hours. Some activity costs are strictly variable and are caused  by the production or acquisition of a single unit of product or the performance of a single unit of  service. However, the recognition that other activity costs are not driven by unit-based cost drivers  has led to the development of a classification of ABC activities consisting of four levels, as follows:  1.   Unit-level activities . Activities performed for each unit of prod 2.   Batch-level activities . Activities performed for each batch of pr
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Unformatted text preview: 3. Product-level activities . Activities performed in support of an always performed every time a new unit or batch of products is 4. Facility-level activities . Activities required to support or sustain Companies may achieve greater accuracy in overhead cost allocation by recognizing these four different levels of activities and, from them, developing specific activity cost pools and their related cost drivers. Illustration 17-13 graphically displays this four-level activity hierarchy, along with the types of activities and examples of cost drivers for those activities at each level. Illustration 17-13 Hierarchy of activity levels...
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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Classification of Activity Levels - 3 Product-level...

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