CA Intermediate · Cost and Management Accounting · Activity Based Costing
In Activity Based Costing, which of the following activities is classified as a 'batch-level' activity?
Machine setup before each production run is a batch-level activity, because it is performed once per batch regardless of how many units the batch contains. Unit-level, product-sustaining and facility-sustaining activities are different categories, so the other options do not qualify.
- AMachine setup carried out before each production runCorrect
- BPlant manager's salary and administration of the factory
- CRedesigning a product's specification
- DInspection of every single unit produced
Explanation
Batch-level activities are performed each time a batch is processed, irrespective of the number of units in the batch. Machine setup occurs once per batch, so it fits. Inspecting every unit is unit-level, product redesign is product-sustaining, and plant administration is facility-sustaining.
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