The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a(n): Unit-level activity.

Unit‐level activities occur every time a service is performed or a product is made. The costs of direct materials, direct labor, and machine maintenance are examples of unit‐level activities.

Batch-level activities can include machine setup, quality testing, maintenance, and purchase orders.

The correct answer is c. Inspecting is not a unit-level activity; it is a batch-level activity.

The ABC system of cost accounting is based on activities, which are any events, units of work, or tasks with a specific goal, such as setting up machines for production, designing products, distributing finished goods, or operating machines. Activities consume overhead resources and are considered cost objects.

A product-level activity is an action taken in support of a specific product or activity. These actions are taken irrespective of the amount of production or service volume associated with a product. Examples of product-level activities are: Cost of the product manager for a product.

Facility-level activities are those actions taken to maintain the general operations of a business. These actions cannot be traced to individual products, production cells, or product lines.

An activity-based costing rate is calculated by assigning indirect costs to a cost pool, adding the costs included in that cost pool together, then dividing the cost pool total by the cost driver.

ABC system is to identify the activities for which costs are to be collected and controlled. Its objective is rectifying the inaccurate cost information. This system recognises individual activity as the lowest unit for indirect cost allocation. Cost allocated to each activity represents the resources consumed by it.

The following are the advantages of ABC:

• Accurate Product Cost:
• Information about Cost Behaviour:
• Tracing of Activities for the Cost Object:
• Tracing of Overhead Costs:
• Better Decision Making:
• Cost Management:
• Use of Excess Capacity and Cost Reduction:
• Benefit to Service Industry:

What are three advantages of activity-based costing over traditional volume-based allocation methods? More accurate product costing, more effective cost control, and better focus on the relevant factors for decision making.

Features or Characteristics of Activity Based Costing 1. The total cost is divided into two types i.e. fixed cost and variable cost which is necessary to provide quality information to design a suitable cost system in a manufacturing concern. 2. The proper distinction is made between the cost behavior patterns.

Activity method is a technique adopted by a teacher to emphasize his or her method of teaching through activity in which the students participate rigorously and bring about efficient learning experiences. It is a child-centered approach. Learning by doing is the main focus in this method.

Depending on your needs, it may be necessary to count class B inventory as infrequently as twice per year and class C inventory only once per year. The ABC analysis method saves time and labor counting only the inventory required by the cycle for the class of inventory versus counting all inventory items each cycle.

ABC Analysis Benefits Increased Inventory Optimization: The analysis identifies the products that are in demand. A company can then use its precious warehouse space to adequately stock those goods and maintain lower stock levels for Class B or C items.

ABC analysis is an inventory categorization method which consists in dividing items into three categories (A, B, C): • A being the most valuable items, • C being the least valuable ones. This method aims to draw managers’ attention on the critical few (A-items) not on the trivial many (C-items).

ABC inventory classification – an example

1. Use the formula ‘annual number of units sold x cost per unit’ to calculate the annual consumption value of each item.
2. List your products in descending order, based on their annual consumption value.
3. Total up the number of units sold and the annual consumption value.

The steps to conduct an ABC analysis are as follows:

1. Determine annual usage or sales for each item.
2. Determine the percentage of the total usage or sales by item.
3. Rank the items from highest to lowest percentage.
4. Classify the items into groups.

Manufacturers deal with three types of inventory. They are raw materials (which are waiting to be worked on), work-in-progress (which are being worked on), and finished goods (which are ready for shipping).

ABC analysis divides an inventory into three categories—”A items” with very tight control and accurate records, “B items” with less tightly controlled and good records, and “C items” with the simplest controls possible and minimal records.

The goal of ABC classification is to provide a way for a business to identify that valuable 20% so that segment can be controlled most closely. Once the A’s, B’s and C’s have been identified, each category can be handled in a different way, with more attention being devoted to category A, less to B, and even less to C.

ABC method of inventory control involves a system that controls inventory and is used for materials and throughout the distribution management. It is also known as selective inventory control or SIC. ABC analysis is a method in which inventory is divided into three categories, i.e. A, B, and C in descending value.