In Activity Based Costing, which type of activity involves the use of indirect materials and consumables?

In Activity Based Costing (ABC), the activity that involves the use of indirect materials and consumables is typically classified as facility-level activities. Facility-level activities are those that are necessary for the overall operation of the business and support the production of all products, but they do not directly tie to individual units or batches of production. The costs associated with facility-level activities, such as utilities, building maintenance, and indirect materials, are often incurred regardless of the number of units or batches produced.

Unit-level activities, on the other hand, are those that are performed each time a unit is produced; they include costs that vary directly with the number of units made. Batch-level activities occur when a group of units is produced at once, such as setting up machinery for a production run. Product-level activities relate to specific products or services and support the development, production, or sale of those products.

Understanding this distinction helps in accurately allocating costs in ABC, as it allows businesses to connect expenses incurred during the production process with the activities that drive those costs.