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CMA Final · Strategic Cost Management · Activity Based Cost Management

Which one of the following is a unit-level activity under the Activity Based Costing hierarchy?

Machine hours used in cutting each unit is a unit-level activity because it is performed for every unit produced and its cost rises in proportion to output. Setups are batch-level, product design is product-sustaining, and building maintenance is facility-sustaining.

  1. AMachine hours consumed in cutting each unit of productCorrect
  2. BSetting up a machine for each production batch
  3. CDesigning a new product variant
  4. DMaintaining the factory building

Explanation

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

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