Determine the hierarchy level for each cost pool

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Reference no: EM13487322

After a study of its processes, a firm determines it has the following 4 overhead cost pools related to the production of its 2 products: Set-up, Shipping, Product design, and Plant utilities and administration.

Both products are produced in the same facility using the same equipment. Product XYZ is a higher volume product that takes a relatively small amount of machine-time to produce, while Product ABC is a lower volume product that takes a significantly higher amount of machine-time. Also, Product XYZ requires very little set-up time, while Product ABC requires a more time-consuming set-up. Both products are shipped in a similar way, with each shipment requiring a similar amount of work.

Based on this information, determine the hierarchy level for each cost pool and an appropriate allocation base for each pool.


Cost Pool

Hierarchy Level

Allocation Base









Product design




Plant utilities & administration





Reference no: EM13487322

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