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Activity categories - produced or a series of steps is...

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Activity categories While using cost drivers to assign overhead costs to individual units works well for some activities,  for some activities such as setup costs, the costs are not incurred to produce an individual unit but  rather to produce a batch of the same units. For other costs, the costs incurred might be based on  the number of product lines or simply because there is a manufacturing facility. To assign overhead  costs more accurately, activity-based costing assigns activities to one of four categories:  Unit-level activities  occur every time a service is performed or a product is made.  The costs of direct materials, direct labor, and machine maintenance are examples of unit- level activities.  Batch-level activities  are costs incurred every time a group (batch) of units is 
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Unformatted text preview: produced or a series of steps is performed. Purchase orders, machine setup, and quality tests are examples of batch-level activities. • Product-line activities are those activities that support an entire product line but not necessarily each individual unit. Examples of product-line activities are engineering changes made in the assembly line, product design changes, and warehousing and storage costs for each product line. • Facility support activities are necessary for development and production to take place. These costs are administrative in nature and include building depreciation, property taxes, plant security, insurance, accounting, outside landscape and maintenance, and plant management's and support staff's salaries....
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