Question

Question 9

Required information [The following information applies to the questions displayed below.) Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Indirect Materials Other Overhead Indirect Labor $340,000 $170,000 Production Activity Grinding Polishing Product modification Providing power System calibration 400,000 $ 210,000 460,000

Answer 1

Solution:

1.

Grinding	Unit level
Polishing	Unit level
Product modification	Product level
Providing power	Facility level
System calibration	Batch level

Explanation:

Unit level: Unit level activities occur every time a service is performed or a product is made. Cost of machine maintenance is an example of unit level activity Here Grinding and polishing are based on machine hours so it is a unit level of activity.

Batch level: Batch level activities are costs incurred every time a group or batch of units are produced. Machine setups and purchase orders are examples of batch level. Here system calibration is a batch level of activity.

Product level of activity : A product level activity is action taken in support of a specific product or activity. Here. product modification is an product level of activity because modification is support of a specific product.

Faciltiy level: These costs are kept separate from product costs and are not allocated to individual units because the allocation would be made on an arbitary basis such as square feet, number of divisions of products. Here Providing power is a facility level of activity.