Question

1. Betsy’s Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred $1,450,000 of product development costs, $2,500,000 of production line labor costs, $900,000 for production setup costs, $500,000 in power costs for cooling beer and running equipment and $1,750,000 for manufacturing facility management. Using the manufacturing cost hierarchy, what is the total cost that would be classified as batch-level activity costs?

1. $700,000
2. $900,000
3. $1,200,000
4. $1,250,000
5. None of above

Answer 1

Answer is B. $ 900,000

Batch-level activities are costs related to the production of a batch of one product.Batch‐level activities are costs incurred every time a group (batch) of units is produced or a series of steps is performed.Therefore Production setup costs of $ 900,000 is the correct answer.