What are Batch-Level Activities
Batch-level activities, as classified in an activity-based costing accounting system, are related to costs incurred every time a batch is produced, regardless of how big the production run is. Batch-level cost drivers include machine setups, maintenance, purchase orders and quality tests.
BREAKING DOWN Batch-Level Activities
Batch-level activities are one of the five broad levels of activity that activity-based costing allocates the cost of overhead to. The others are unit-level, customer-level, production-level and organization-sustaining activities.
Activity-based costing provides more detailed information than traditional volume-based cost accounting systems that ignore sales-related costs, and which can, therefore, provide misleading information about the profitability of products, product lines, customers and markets. It does better to assign costs to the causes of those costs.
By more accurately and reliably classifying overhead costs at the batch level than traditional cost accounting systems, it is easier for manufacturers to determine the breakeven point of cost and units produced, through cost-volume profit analysis. This helps managers identify non-value-adding activities and process inefficiencies, and increase profitability.