Product Cost Hierarchy
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For the following list of costs, indicate by the appropriate letter which category of activities each cost applies to unit level (U), batch level (B), product line (P) or facility support (F):
a. Machine fine-tuning adjustment cost (required after the production of each unit)
b. Salary of vice president of finance
c. Machine inspection cost (required after the completion of each day's production)
d. Cost of the external audit firm
e. Direct labor
f. Product testing cost (performed at the start of each day's production)
g. Direct materials
h. Factory security cost
i. Machine straight-line depreciation cost (Generally, machines are dedicated to producing a
particular type of product.)
j. Warehousing cost (Each type of product has its own warehouse.)
k. Employee training cost (Training is generally specific to different types of products.)
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Solution Summary
The solution explains how to classify the given costs under the product cost hierarchy
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a. Machine fine-tuning adjustment cost (required after the production of each unit)
Unit level - since it is required after each unit
b. Salary of vice president of finance
Facility Support - since the function is for the total facility
c. Machine inspection cost (required after the completion of each day's production)
Batch Level - Each ...
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