Question

Steve’s Slop Shop, a small hamburger shop, has identified the resources used in its operations (assume each customer’s order is a batch for this example):

Required:

1. Classify its costs as unit-level, batch-level, product-level, or facility-level costs.

2. Suggest a proper driver for each of the items.

Required 1

Classify its costs as unit-level, batch-level, product-level, or facility-level costs. (If an activity can be classified with more than one selection, choose the option that contains ALL the appropriate classifications.)

	Resources	Cost Hierarchy
a.	Bread
b.	Hourly workers that cook hamburgers
c.	Store rent
d.	Ground beef
e.	Catsup
f.	Advertising for Triple-Burger special
g.	Salary for the store managers
h.	Utilities
i.	$1-off-coupon for each order
j.	Bags for each order

Required 2

Suggest a proper driver for each of the items. (If an activity can be classified with more than one selection, choose the option that contains ALL the appropriate classifications.)

	Resources	Cost Driver
a.	Bread
b.	Hourly workers that cook hamburgers
c.	Store rent
d.	Ground beef
e.	Catsup
f.	Advertising for Triple-Burger special
g.	Salary for the store managers
h.	Utilities
i.	$1-off-coupon for each order
j.	Bags for each order

Answer 1

Answer:

Requirement 1

a.Bread - Unit Level

b. Hourly workers that cook hamburgers - Unit Level

c. Store rent - Facility Level

d. Ground beef - Unit Level

e. Catsup - Unit Level

f. Advertising for Triple-Burger special - Product Level

g. Salary for the store managers - Facility Level

h. Utilities - Facility Level

i. $1-off-coupon for each order - Batch Level

j. Bags for each order - Batch Level (if one bag per customer)

Requirement 2

a. Bread - Number of Hamburgers

b. Hourly workers that cook hamburgers - Number of Hours

c.Store rent - Square Feet

d.Ground beef - Number of Hamburgers / Size of Hamburgers

e.Catsup - Number of Hamburgers

f.Advertising for Triple-Burger special - Number of Times Advertising is run

g.Salary for the store managers - Number of hours store is open

h.Utilities - Square feet

i.$1-off-coupon for each order - Number of coupon redeemed

j.Bags for each order - Number of customers.