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Classify each of the following activities as unit level (U), batch level (B), product level (P), or facility level (F) for a manufacturer of organic juices.

  1. Cutting fruit
  2. Developing new types of juice
  3. Blending fruit into juice
  4. Receiving fruit shipments
  5. Cleaning blending machines

6. Reducing water usage

Short Answer

Expert verified
  1. Cutting fruit - U
  2. Developing new types of juice – P
  3. Blending fruit into juice - U
  4. Receiving fruit shipments - F
  5. Cleaning blending machines - B
  6. Reducing water usage - F

Step by step solution

01

Meaning of Product Line Activities

Product line activities are the activities that perform or support the whole product line and are not affected by each unit.

02

Classify each of the following activities.

S.no.

Activities

Explanation

1

Cutting fruit

Every time a product is created, unit-level operations take place. It differs from batch-level operations, which occur each time a batch of objects is created. Cutting fruits leads to daily activity, which results in unit level.

2

Developing new types of juice

An activity that supports a certain object or movement is a product-level action. These measures are taken in any case of the quantity of manufacture or service associated with a product. Developing a new type of juice is denoted as a product level.

3

Blending fruit into juice

A new product is formed by blending fruit into juice. Hence it is considered at a unit level.

4

Receiving fruit shipments

The acts performed to support a business's by and large operations are alluded to as facility-level exercises. Hence receiving shipments of fruits is a large operational activity and is considered a facility-level exercise.

5

Cleaning blending machines

Because batch-level operations are linked to the cost of making a batch of a certain item, the cleaning of blending equipment is carried over to the batch level.

6

Reducing water usage

Reducing water use reflects larger business operations and should be treated at a facility level.

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Most popular questions from this chapter

A company has two products: standard and deluxe. The company expects to produce 36,375 standard units and 62,240 deluxe units. It uses activity-based costing and has prepared the following analysis showing budgeted cost and cost driver activity for each of its three activity cost pools.

Budgeted Activity of

Cost Driver

Activity Cost Pool Budgeted Cost Standard Deluxe

Activity 1 …………………… \(93,000 2,500 5,250

Activity 2 …………………… \)92,000 4,500 5,500

Activity 3 …………………… $87,000 3,000 2,800

Required

1. Compute overhead rates for each of the three activities.

2. What is the expected overhead cost per unit for the standard units?

3. What is the expected overhead cost per unit for the deluxe units?

In what way are departmental overhead rates similar to a single plantwide overhead rate? How are they different?

The following is taken from Ronda Co.’s internal records of its factory with two production departments. The cost driver for indirect labor and supplies is direct labor costs, and the cost driver for the remaining overhead items is number of hours of machine use. Compute the total amount of overhead cost allocated to Department 1 using activity-based costing.

Direct Labor Machine Use Hours

Department 1 ……………… \(18,800 2,000

Department 2 ……………… 13,200 1,200

Totals ……………………….. \)32,000 3,200

Factory overhead costs

Rent and utilities …………………………………….. \(12,200

Indirect labor ………………………………………..... 5,400

General office expense ……………………………... 4,000

Depreciation — Equipment ………………………….. 3,000

Supplies ……………………………………………….. 2,600

Total factory overhead ……………………………… \)27,200

A manufacturer uses activity-based costing to assign overhead costs to products. Budgeted cost information for selected activities for next year follows. Form two cost pools and compute activity rates for each of the cost pools.

Activity

Expected Cost

Cost Driver

Expected Usage of Cost Driver

Purchasing

$135,000

Purchase orders

4,500 purchase orders

Cleaning factory

32,000

Square feet

5,000 square feet

Providing utilities

65,000

Square feet

5,000 square feet

Samsung is a manufacturer. "Activity based costing is only useful for manufacturing companies." Is this a true statement? Explain.

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