Question

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Mitchell Corporation manufactures a variety of products in a single facility. Consultants hired by the company to do an activity-based costing analysis have identified the following activities carried out in the company on a routine basis: Required: 1. Classify each of the above activities as a unit-level, batch-level product-level, or facility-level activity (Hint: Some activities may be classified under more than one level.) 2. For each of the above activities, suggest an activity measure that could be used to allocate its costs to products. Level Possible Activity Measures Activity a. Milling machines are used to make components for products. b. A percentage of all completed goods are inspected on a random basis. c. Production orders are issued for jobs. d. The company's grounds crew maintains planted areas surrounding the factory . Employees are trained in general procedures The human resources department screens and hires new employees 9. Purchase orders are issued for materials required in production h. Material is received on the receiving dock and moved to the production area. i. The plant controller propares periodic accounting reports The engineering department makes modifications in the designs of products. K. Machines are set up between batches of different products The maintenance crew doos routine periodic maintenance on general-purpose equipment.

Answer 1

	Activities	Leavel	Possible Activity Measure
a	Miling machines are used to make components for products	Unit	Number of Units Processe..Machine Hour
b	A percentage of all completed goods are inspected on a random basis	Unit	Number of Unit Inspected...Inspection time
c	Production orders are issue for jobs	Batch	Number of Production orders
d	The company's grounds crew maintains planted areas surrounding for factory	Facility	Arbitrary
e	Employees are trained in general procedure	Facility or Product	Arbitrary
f	The human resource department screens and hires new employees	Facility	Arbitrary
g	Purchase order are issued for material required in production	Batch	Number of Purchase Order
h	Materials is received on the receiving dock and moved to the production area	Batch or Unit	Number of Material moves
i	The plant controller prepares periodic accounting reports	Facility	Arbitrary
j	The engineering department make modifications in the design of product	Product	Engineering Time
k	Machine are set up between batches of different product	Batch	Number of setup ; Setup time
l	The maintenance crew does routine periodic maintance on general purpose equipment	Facility	Arbitrary