Question

Mama Donna’s Bakery produces cupcakes in a variety of unique flavors. The company’s cupcakes are offered for sale in many local restaurants. When a purchase order is placed by a restaurant, the cost related to processing purchase order is most likely attributed to a(n) ________ activity.

Answer 1

Batch Level

Step-by-step explanation:

Batch level activity is the cost incurred that is related to the production of a certain batch of a product. It is usually associated with the cost incurred in the production of a group of units which cannot be traceable to individual units within a batch.

For instance, the incurred cost for setting up a machine to produce a batch of 10,000 units of an item is referred to as batch level cost. The cost can only be allocated to the 10,000 units produced per batch, not just one unit in the batch. In addition to machine setups, other cost drivers are inspection, purchase orders, direct labor hour, quality tests etc.