CA Intermediate · Cost and Management Accounting · Activity Based Costing
Which of the following is a typical example of a facility-sustaining (business-sustaining) level activity in the ABC cost hierarchy?
Factory building maintenance and plant security are facility-sustaining activities because they support the whole organisation and are not caused by any single product, batch or unit. Set-ups are batch-level, per-unit inspection is unit-level, and product design is product-level.
- AFactory building maintenance and plant securityCorrect
- BSetting up machines for each production batch
- CInspecting every unit produced
- DDesigning a specific product variant
Explanation
Facility-sustaining activities support the entire plant and cannot be traced to any particular product, batch or unit, such as building maintenance and security. Set-ups are batch-level, unit inspection is unit-level, and product design is product-level.
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