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Cost hierarchy

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Otto Dieffenbach & Sons, Inc. is a small manufacturing company in La Jolla that uses activity-based costing. Dieffenbach & Sons accumulates overhead in the following activity cost pools.

1. Hiring personnel.
2. Managing parts inventory.
3. Purchasing.
4. Testing prototypes.
5. Designing products.
6. Setting up equipment.
7. Training employees.
8. Inspecting machined parts.
9. Machining.
10. Assembling.

For each activity cost pool, indicate whether the activity cost pool would be unit-level,
batch-level, product-level, or facility-level.

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Solution Summary

The solution explains how to differentiate the costs as unit-level, batch-level, product-level, or facility-level

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A cost is classified as unit, batch, product or facility level depending on how the cost will change. A cost which changes for each unit of production is a unit level cost, costs inucrred for a batch of production are batch level costs, costs incurred for specific products are product level ...

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