Question

Rock Bottom's Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities.

During the past year, it has incurred:

Cost	Description
$725,000	Product development costs
$475,000	Materials handling costs
$1,250,000	Production line labor costs
$450,000	Production setup costs
$250,000	Power costs (for cooling beer and running equipment)
$875,000	Manufacturing facility management costs

Using the manufacturing cost hierarchy, what is the total cost that would be classified as facility-level activity costs?

Answer 1

Ans.	$875,000
	Explanations: Manufacturing facility management cost is an only example
	of facility level activity costs.
	The other costs will be classified by the following way :
	Description	Activity level
	Product development costs	Product level activity
	Materials handling costs	Unit level activity
	Production line labor costs	Unit level activity
	Production setup costs	Batch level activity
	Power costs (for cooling beer and running equipment)	Unit level activity