Which overhead cost is associated with batch-level activities?

In activity-based costing, costs are categorized into a hierarchy. Batch-level activities are performed each time a batch of goods is processed. Machine setups are a classic example of a batch-level activity because the setup is performed once for an entire batch, regardless of the number of units in that batch. The cost of the setup is thus associated with the batch itself.

A. Property taxes are facility-level costs, as they sustain the entire production facility and are not traceable to specific batches or products.

C. Factory insurance is a facility-level cost that relates to the overall plant operations, not to the production of individual batches.

D. Product engineering wages are product-level (or product-sustaining) costs, incurred to design or support a specific product line, not a particular batch.

1. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting (17th ed.). McGraw-Hill. Chapter 7, "Activity-Based Costing: A Tool to Aid Decision Making," discusses the cost hierarchy, identifying machine setups as a batch-level activity.

2. Hilton, R. W., & Platt, D. E. (2020). Managerial Accounting: Creating Value in a Dynamic Business Environment (12th ed.). McGraw-Hill. Chapter 5 provides examples of the levels of activities, classifying setup costs as batch-level.

3. MIT OpenCourseWare. (2004). 15.963, Management Accounting and Control, Lecture Notes, Session 6: Activity-Based Costing. Retrieved from https://ocw.mit.edu/courses/sloan-school-of-management/15-963-management-accounting-and-control-spring-2007/lecture-notes/lec6.pdf (Page 10 describes the cost hierarchy).