Question

Wu Production Company, which uses activity-based budgeting, is in the process of preparing a manufacturing overhead budget. Which of the following would likely appear on that budget? Facility and general operations-level costs: Indirect material. Batch-level costs: Production setup. Product-level costs: Insurance and property taxes. Unit-level costs: Maintenance. Unit-level costs: Depreciation.

Answer 1

Option which would likely appear on that budget will be:

Batch level costs: production setup.

Step-by-step explanation:

Here the company uses activity based budgeting is a management accounting tool which new year budget is only seen by not considering the previous year records.

Activity based budgeting which is a budgeting method in which firstly the overhead costs are being calculated and the the budgets gets created.

Batch-level cost is a cost which is not associated with any given specific individual units but is associated with a group of units.

For example, to set up a production run the cost incurred is associated with the batch of goods that are produced subsequently.

Another example can be be procurement costs. The expenses associated with the procurement costs include the ordering of direct materials, paying suppliers and receiving goods.

Since all of the expenses are related to the orders placed numbers, they must be allocated not to an individual product but to group of unit.