CMA Final · Strategic Cost Management · Activity Based Cost Management
Under activity based costing, the cost of 'product design modification', which is incurred for each product line regardless of the number of units or batches, is classified as which level of activity?
It is a product-sustaining activity. Design modification supports a particular product line irrespective of units made or batches run, whereas unit-level costs vary with each unit, batch-level costs with batches, and facility-level costs benefit the entire plant.
- AUnit-level activity
- BBatch-level activity
- CProduct-sustaining activityCorrect
- DFacility-sustaining activity
Explanation
Product-sustaining activities support a specific product line, such as design and engineering changes, independent of volume or batches. Batch-level costs depend on batches, and facility-sustaining costs support the whole plant.
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