EXERCISE 4–6 Cost Hierarchy and Activity Measures LO4–1 Various activities at Companhia de Textils, S.A., a manufacturing company located in Brazil, are listed below. The company makes a variety of products in its plant outside São Paulo.

a. Preventive maintenance is performed on general-purpose production equipment.

b. Products are assembled by hand.

c. A security guard patrols the company grounds after normal working hours.

d. Purchase orders are issued for materials to be used in production.

e. Modifications are made to product designs.

f. New employees are hired by the personnel office.

g. Machine settings are changed between batches of different products.

Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced h. Parts inventories are maintained in the storeroom. (Each product requires its own unique parts.)

i. Insurance costs are incurred on the company’s facilities.

Required:

1. Classify each of the activities as either a unit-level, batch-level, product-level, or facility-level activity.

2. Where possible, name one or more activity measures that could be used to assign costs generated by the activity to products or customers.