Mitchell Corporation manufactures a variety of products in a single facility. Co
ID: 341161 • Letter: M
Question
Mitchell Corporation manufactures a variety of products in a single facility. Consultants hired by the company to do an activity-based costing analysis have identified the following activities carried out in the company on a routine basis Required 1. Classify each of the above activities as a unit-level, batch-level, product-level, or facility-level activity (Hint: Some activities may be classified under more than one level.) For each of the above activities, suggest an activity measure that could be used to allocate its costs to products. 2. Activity Level Possible Activity Measures a Miing machines are used to s for products Miling machines are used to make b. A percentage of all completed goods are inspected on a random basis c. Production orders are issued for jobs. d. The company's grounds crew maintains planted areas surrounding he factory e. Employees are trained in general procedures. f. The human resources department screens and hires new employees. g. Purchase orders are issued for materials required in production h. Material is received on the receiving dock and moved to the production area. . The plant controller prepares periodic accounting reports ). The engineering department makes modifications in the designs of products k. Machines are set up between batches of different products . The maintenance crew does routine periodic maintenance on general-purposaExplanation / Answer
Activity Level Possible activity Measure a. Milling machines are used to make components for products. Unit Level Number of units processed; Machine-hours b. A percentage of all completed goods are inspected on a random basis. Unit Level Number of units inspected; Inspection time c. Production orders are issued for jobs. Batch Level Number of production orders d. The company’s grounds crew maintains planted are as surrounding the factory. Facility Level Arbitrary e. Employees are trained in general procedures. Facility or Product Level Arbitrary if factory-level f. The human resources department screens and hires new employees. Facility Level Arbitrary g. Purchase orders are issued for materials required in production. Batch Level Number of purchase orders h. Material is received on the receiving dock and moved to the production area. Batch or Unit Level Number of material moves i. The plant controller prepares periodic accounting reports. Facility Level Arbitrary j. The engineering department makes modifications in the designs of products. Product Level Engineering time k. Machines are set up between batches of different products. Batch Level Number of setups; Setup time l. The maintenance crew does routine periodic maintenance on general-purpose equipment. Facility Level Arbitrary