Chapter 4, Problem 6E

Cost Hierarchy and Activity Measures L04−1
Various activities at Companhia de Textils. S.A.,a manufacturing company located in Brazil, are listed below. The company makes a variety of products in its plant outside Săo Paulo.
a. Preventive maintenance is performed on general-purpose production equipment.
b. Products are assembled by hand.
c. A security guard patrols the company grounds after normal working hours.
d. Purchase orders are issued for materials to be used in production.
e. Modifications are made to product designs.
£ New employees are hired by the personnel office.
g. Machine settings are changed between batches of different products.
h. Parts inventories are maintained in the storeroom. (Each product requires its own uniqueparts.)
i. Insurance costs are incurred on the company’s facilities.
Required:
1. Classify each of the activities as either a unit-level, batch-level, product-level, or facility-level activity.
2. Where possible, name one or more activity measures that could be used to assign costs generated bythe activity to products or customers.