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    Classification of activities/cost drivers

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    Dynamic Products, Inc. manufactures a wide variety of products in its plant in Macon, Georgia. Management has identified the following manufacturing and administrative activities:

    1. Special equipment is used to add a protective finish to various products.
    2. Purchase orders are issued to acquire raw materials.
    3. Factory managers run training progrms in quality control for new employees.
    4. Machine setups are necessary for each batch of goods produced.
    5. Janitors clean the offices and the plant floor each evening.
    6. Warehouse personnel pull the stock needed for production and move the materials to the plant floor.
    7. Receiving clerks inspect incoming materials and prepare receiving reports.
    8. Quality control inspectors test each batch of goods before it is stored or shipped.
    9. Payroll checks process the factory workers' time cards and prepare weekly paychecks for distribution
    10. Engineers develop new product specifications and redesign existing products as needed.

    A. Classify each of the activities listed as a unit-level, batch-level, product-level or facility-level activity.
    B. Identify a cost driver for each of the activities that could be used to apply costs to Dynamic's products.
    C. For each activity, identify one or more traceable costs.
    D. Explain how the hierarchy provides insights that affect decision making.

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    Solution Summary

    The solution explains the classification of the given activities, their cost drivers and traceable costs