Identifying Overhead Cost Activities
Response to the following problem:
Below is a list of overhead cost activities. For each activity, determine whether it is a unitlevel, batch-level, product line, or facility support activity.
1. Employee training: Employees need special training to work with each of the company's different products.
2. Product inspection: No inspection is performed on each unit produced. Instead, a sample of units from each production batch is inspected.
3. Electricity: The production machines are powered by electricity.
4. Liability insurance: Because of hazardous chemicals used throughout the plant, the company is required to buy a liability insurance policy.
5. Product design: A staff of design engineers generates refinements to the designs of each of the products.
6. Vice president in charge of production: The company vice president has specific responsibility for overseeing all aspects of the production facility.
7. Machine setup: The production machines must be repositioned and inspected at the beginning of each production batch.
8. Machine setup: The production machines must be repositioned and inspected only when production is changed from one type of product to another.
9. Product inspection: An inspection is performed on each unit produced.
10. Machine maintenance: The production machines need constant preventative maintenance in order to extend their operating lives.