Mitchell Manufacturing's single finished goods warehouse is located across the street from its manufacturing facility. A recent study of product sales showed that most product lines are sold primarily in a single geographical region. For instance, the Willamette line is sold primarily in the Northwest, while the Neuse line is sold primarily in the Southeast. To reduce delivery time to customers, the company has decided to close the existing warehouse and lease five smaller regional warehouses that will each serve a single product line.

Required

a. Classify the warehouse costs under the current single-warehouse scenario as unit-level, batch-level, product-level, customer-level, or organization-level.

b. Classify the warehouse costs under the proposed multiple-warehouse scenario as unit-level, batch-level, product-level, customer-level, or organization-level.

c. Under an activity-based accounting system, what effect will the change in warehouse strategy have on product costs?