Question

Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining. Explain each answer.

Answer 1

Output unit-level costs are directly tied to each unit of output, batch-level costs are incurred per specific batch, product-sustaining costs support an entire product line, and facility-sustaining costs support the overall operation of a facility.

Step-by-step explanation:

Output unit-level costs are costs that are directly tied to the production of each unit of output. For example, the cost of materials used to produce a unit of a product would be an output unit-level cost.

Batch-level costs are costs that are incurred for a specific batch of products. An example would be the cost of setting up a machine to produce a certain number of units.

Product-sustaining costs are costs that are incurred to support the production and sale of an entire product line. Examples include marketing and advertising expenses.

Facility-sustaining costs are costs that are incurred to support the overall operation of a facility, regardless of the level of production. Examples include rent and utilities.