10. Cost Management II

Question 1

10. What is Activity-based costing (ABC)?

Answer 1

The process of allocating costs incurred in supplying the product or service based on the amount of activity required to produce it.

Question 2

10. Whats are the four levels of the cost hierarchy?

Answer 2

1. Unit level – direct costs for creating a product/service.
2. Batch level – costs related to producing a batch of products/services.
3. Product-sustaining level – costs related to sustaining products/services.
4. Facility-sustaining level – costs relating to maintaining the facility or running the business as a whole.