Question

In an activity-based costing system, activities are classified into five categories. List and define the five categories and give one example of each type of activity.

Answer 1

Answer- The five categories of activities in activity-based costing system are as follows-

1)- Unit-level activity= Unit-level costs are incurred proportionately with the no. of units manufactured.

Example- Direct materials

2)- Batch-level activity = These activities are performed in each time when a batch of product are produced.

Example- Set-ups

3)- Product-level activity= These activities are performed when firms are produce specific products. These costs are increased when new products or new segment line in existing products/segments chain.

Example- Product specification

4)- Customer level activity = These costs are based on the no. of customers related activities.

Example= Technical support

5)- Organization sustaining activity= These costs are incurred due to providing central facilities executive compensation.

Example = Security

answered by: anonymous