Which of the following is a cost pool used with the activity-based costing method?

Question

BlackTom AI · Accepted Answer

Production setups are a classic example of a batch-level cost pool because setup activities incur costs whenever a production run or batch is started, and those costs can be traced to the activity of setting up equipment rather than to individual units.

1. Relevant knowledge points and concepts
- A cost pool groups individual costs that are associated with a single activity or purpose so they can be allocated using an activity’s cost driver.
- Activity-based costing (ABC) organizes overhead into multiple activity cost pools (unit-level, batch-level, product-level, facility-level) and uses cost drivers to allocate each pool to products or services.
- Batch-level activities occur each time a batch is produced (examples: machine setups, inspection of batches, order processing).

2. Step-by-step reasoning
- Identify what each answer option represents and whether it is an ABC-style activity cost pool.
- Determine whether the item is an activity that causes costs (suitable for a cost pool) or a broad aggregated category or direct cost.

3. Mapping options to ABC concepts (intermediate steps)
- Production setups: an activity performed each time a new batch/run begins ⇒ batch-level cost pool. Fits ABC’s approach of grouping setup costs into a pool and allocating them by number of setups or setup hours.
- Direct materials dollars: represents a direct cost/base amount, not an overhead activity cost pool. It’s typically a cost driver or direct-cost trace, not an ABC pool.
- Total selling and administrative expenses: a broad functional, period-cost grouping; not an activity-based cost pool for manufacturing overhead allocation.
- Total factory overhead: a single aggregated overhead pool used in traditional costing, not the multiple, activity-specific pools required in ABC.

4. Why the correct answer is correct
Production setups meet the ABC definition of an activity-based cost pool (batch-level). Costs of setups are accumulated in a setup cost pool and allocated using a setup-related driver (e.g., number of setups or setup hours).

5. Why the other options are incorrect
- Total selling and administrative expenses: too broad and period-oriented, not an activity cost pool for ABC allocation.
- Direct materials dollars: a direct cost item or base, not a pooled overhead activity.
- Total factory overhead: an aggregate traditional pool, contrary to ABC’s multiple specific activity pools.

6. Conclusion
Therefore, production setups is the correct cost pool used with activity-based costing, which matches the provided answer: production setups.

Which of the following is a cost pool used with the activity-based costing method?单项选择题

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