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CA Intermediate · Cost and Management Accounting · Activity Based Costing

In Activity Based Costing, which of the following is a 'unit-level' activity, i.e. one performed every time a unit of product is produced?

Machine operation on each unit is a unit-level activity because it is performed every time a unit is made and its cost varies with volume. Set-ups are batch-level, product design is product-sustaining, and building maintenance is facility-sustaining, so they are not unit-level.

  1. AMachine operation (machining each unit)Correct
  2. BSetting up machines for each production batch
  3. CDesigning the product specification
  4. DMaintaining the factory building

Explanation

Unit-level activities are performed for every unit produced, so their cost varies with the number of units. Machining each unit fits this. Set-ups are batch-level, product design is product-sustaining, and building maintenance is facility-level.

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