Question

Discuss the term cost object in the four level of indirect costs with in ABC system?

Answer 1

Any object classified as an activity-based driver for assigning costs is called as cost driver. Examples could be Direct Material, etc

The four levels of indirect cost under an activity-based costing are as follows:

1. Unit level costs: These costs increase with every unit of output produced. Examples include direct materials, direct labour cost, etc.
2. Batch level costs: These costs are pertaining to activities perfromed for a group or batch of units, rather than independent ones. The costs increase will every batch produced or procured or activities performed. Examples include, purchase order costs, inspection costsc etc
3. Product Line level costs: These costs are incurred on activities pertaining to a specific product line. Example advertisement cost, warehouse costs, etc.
4. Facilities level costs: These costs are purely general and administration based. They do not depend upon any level of units produced or any product lines. Examples include property taxes, etc