Chapter 3

Question 0

What is activity-based costing?

Answer 0

A two-stage costing method in which overhead costs are assigned to products on the basis of the activities they require.

Question 1

What is the four-level hierarchy of activity-based costing?

Answer 1

1. Unit-level activities
2. Batch-level activities
3. Product-level activities
4. Facility-level activities

Question 2

What are unit-level activities?

Answer 2

Activities that arise as a result of the total volume of goods and services that are produced, and that are performed each time a unit is produced.

Question 3

What are batch-level activities?

Answer 3

Activities that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch. The amount of resources consumed depends on the number of batches run rather than on the number of units in the batch.

Question 4

What are product-level activities?

Answer 4

Activities that relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.

Question 5

What are facility-level activities?

Answer 5

Activities that are carried out regardless of which products are produced, how many batches are run, or how man units are made.