Question

Which category of the ABC hierarchy has costs that are primarily fixed with little or no cause-and-effect relationship with costs?

Answer 1

There are four categories of activities in ABC system , based upon where the activity occurs in relation to the final product and the facility as a whole.

a) Unit -Level Activity

b) Batch- level activity

c) Product -sustaining activities

d) Facility - Sustaining activities. - Little or no cause and effect relationship with costs.

Facility sustaining costs are the cost of activities that cannot be traced to individual product or service but supports the organisation as a whole. These activities are icurred to support production in general ,such as security ,maintanance ,plant management ect.