ABC Cost Hierarchy

EXERCISE 7–1 ABC Cost Hierarchy [LO1]

The following activities occur at Greenwich Corporation, a company that manufactures a variety of products.

a.       Various individuals manage the parts inventories.

b.       A clerk in the factory issues purchase orders for a job.

c.       The personnel department trains new production workers.

d.       The factory’s general manager meets with other department heads such as marketing to coor- dinate plans.

e.       Direct labor workers assemble products.

f.       Engineers design new products.

g.        The materials storekeeper issues raw materials to be used in jobs.

h.       The maintenance department performs periodic preventive maintenance on general-use equipment.


Classify each of the activities above as either a unit-level, batch-level, product-level, or organization- sustaining activity.


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