In general, activities and costs on different levels in the cost hierarchy-such as unit-level and batch-level costs and activities--should be combined in an activity-based costing system if doing so simplifies the costing system.

Question

Quizplus · Accepted Answer

Activities and costs on different levels in the cost hierarchy should be separated and analyzed separately in an activity-based costing system in order to provide more accurate and detailed insights into the cost drivers and cost structure of the organization. Combining them would not simplify the costing system but rather make it less precise and informative.

In General, Activities and Costs on Different Levels in the Cost