Answer
Four Levels of Cost Hierarchy are
Unit-Level Costs: These costs are directly tied to individual units of a product or service. They vary in proportion to the volume of units produced or services provided. Examples include direct materials and direct labor costs.
Batch-Level Costs: These costs are associated with a group or batch of units rather than individual units. They occur each time a batch is produced or a set of activities is performed. Examples include setup costs and inspection costs for a batch of products.
Product-Level Costs: These costs are incurred to support a specific product or product line. They do not vary with the number of units or batches but are linked to the production or support of the product as a whole. Examples include product design costs and product-specific marketing expenses.
Facility-Level Costs: These are the broadest costs, incurred to maintain the overall production or service facility. They do not vary with the number of products, batches, or units. Examples include rent, facility maintenance, and management salaries.
Work Step by Step
Four Levels of Cost Hierarchy are
Unit-Level Costs: These costs are directly tied to individual units of a product or service. They vary in proportion to the volume of units produced or services provided. Examples include direct materials and direct labor costs.
Batch-Level Costs: These costs are associated with a group or batch of units rather than individual units. They occur each time a batch is produced or a set of activities is performed. Examples include setup costs and inspection costs for a batch of products.
Product-Level Costs: These costs are incurred to support a specific product or product line. They do not vary with the number of units or batches but are linked to the production or support of the product as a whole. Examples include product design costs and product-specific marketing expenses.
Facility-Level Costs: These are the broadest costs, incurred to maintain the overall production or service facility. They do not vary with the number of products, batches, or units. Examples include rent, facility maintenance, and management salaries.
