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CA Intermediate · Cost and Management Accounting · Activity Based Costing

Under Activity Based Costing, which of the following activities is a unit-level activity?

Machining of each unit using machine hours is a unit-level activity because it is performed every time a unit is produced and its cost varies with volume. Setups are batch-level, design is product-sustaining and building maintenance is facility-level.

  1. AMachining of each unit using machine hoursCorrect
  2. BSetting up a machine for each batch
  3. CDesigning a product specification
  4. DMaintaining the factory building

Explanation

Unit-level activities are performed every time a unit is produced, such as machining, so cost varies with volume. Setups are batch-level, product design is product-sustaining, and building maintenance is facility-sustaining.

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