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CMA Intermediate · Management Accounting · Activity Based Costing

In Activity Based Costing, an activity that is performed once for every batch of products produced, irrespective of the number of units in the batch, is classified as which level of activity?

The activity is batch-level. Batch-level activities, such as setups or purchase orders, occur once per batch and their cost depends on the number of batches, not on the units within each batch. Unit-level activities, by contrast, are performed for every single unit produced.

  1. AUnit-level activity
  2. BBatch-level activityCorrect
  3. CProduct-sustaining activity
  4. DFacility-sustaining activity

Explanation

Batch-level activities such as machine setups, batch inspection and material ordering are triggered each time a batch is processed, so their cost varies with the number of batches rather than with units. Unit-level activities vary with every unit produced, which does not fit here.

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