Please assume that in addition to chocolate chip ice-cream, Beth and Jessie have
ID: 2541381 • Letter: P
Question
Please assume that in
addition to chocolate chip ice-cream, Beth and Jessie have expanded their operations to
produce Extra Chewy Cookie Dough ice-cream and Super Creamy Strawberry Cheesecake
ice-cream. They hired a semi-retired chef on a project-by-project basis to help develop these
two flavours; and he is currently experimenting with another new flavour - Very Juicy Mango
Delight. We further assume that the processes are exactly the same to manufacture all three
types of ice-creams, except that different flavours and different “extra ingredients” are added.
A. Please give examples of the following:
Cost object = A box of ice-cream.
1. A unit level cost
2. A batch level cost
3. A product level cost
4. A facility level cost
B. For each of the your examples,
1. Suggest a potential cost driver
Explanation / Answer
1. Unit level cost = ingredients for each unit.
2. Batch level cost = machine hours used in each batch.
3. Product level cost = marketing cost of the new product like advertisements etc.
4. Facility level cost = salary of supervisor.
Potential cost driver for each cost :
1. Ingredients for each unit = cost of ingredients.
2. Batch level cost = total machine hours used.
3. Product level cost = marketing professional hours used.
4. Facility level cost = hours of supervisor used.