Activity-Based Costing (ABC) requires that its users separate costs by the level and then by the type of activity. For a manufacturing business, this would entail separating activity costs into Manufacturing Overhead (MOH) and nonmanufacturing period costs. Which of the following would be considered MOH at the product/process-level?
A) Design costs
B) Factory utilities
C) Marketing for a new product
D) Research and development

Question

Quizplus · Accepted Answer

This question requires differentiation between nonmanufacturing period costs and MOH for a manufacturing business using ABC. Factory utilities (Choice B) is the correct choice as it is the only option given that would be considered MOH. Design costs (Choice A), marketing for a new product (Choice C), and research and development (Choice D) would all be considered nonmanufacturing period costs at the product/process-level.

Activity-Based Costing (ABC) Requires That Its Users Separate Costs by the Level