Chapter 4, Problem 13P

ABC Cost Hierarchy L04−1
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:
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.
e. Employees are trained in general procedures.
f. The human resources department screens and hires new employees.
g. 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 prepares periodic accounting reports.
j. The engineering department makes modifications in the designs of products.
k. Machines are set up between batches of different products.
L The maintenance crew does routine periodic maintenance on general-purpose equipment.
Required:
1. Classify each of the above activities as a unit-level, batch-level, product-level, or facility-level activity.
2. For each of the above activities, suggest an activity measure that could be used to allocate its costs to products.