Question

Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	380,000
Polishing					$	145,000
Product modification		650,000
Providing power									$	240,000
System calibration		510,000

Additional information on the drivers for its production activities follows.

Grinding	18,000	machine hours
Polishing	18,000	machine hours
Product modification	2,000	engineering hours
Providing power	17,000	direct labor hours
System calibration	450	batches

	Job 3175		Job 4286
Number of units	120	units	1,500	units
Machine hours	450	MH	4,500	MH
Engineering hours	28	eng. hours	26	eng. hours
Batches	25	batches	75	batches
Direct labor hours	510	DLH	4,590	DLH

Required:
1. Classify each activity as unit level, batch level, product level, or facility level.

Answer 1

1. Classify each activity as unit level, batch level, product level, or facility level

Answer:

Grinding	Unit level
Polishing	Unit level
Product modification	Product level
Providing power	Facility level
System calibration	Batch level

Explanation:

The unit level means that the activity happens each time, when a product is manufactured. Here, grinding and polishing comes under unit level. Because grinding and polishing happens each time a product is manufactured.

Product level means that the activity that support the entire product line but not compulsory or necessary for each individual product. Product modification comes under product level. It is because product modification is not necessary for each product, but supports the entire product line if needed.

Facility level means that the activity that required for development and the production to happen. Providing power comes under facility level. Because, the providing power is needed for the production to happen.

Batch level means that the activity is performed, all the time a batch of product is produced. System calibration comes under batch level activity. System calibration is a quality measurement for system. So, when a batch of products is produced batch level activity happens.