Question

The ranking of four layers of costs that are incurred in a business is called a ___________.

Answer 1

The ranking of four layers of costs that are incurred in a business is called a cost hierarchy. It categorizes costs based on their behavior and how they relate to production. The four layers of costs in a typical cost hierarchy include unit-level costs, batch-level costs, product-level costs, and facility-level costs.

Step-by-step explanation:

The ranking of four layers of costs that are incurred in a business is called a cost hierarchy. This hierarchy categorizes costs based on their behavior and how they relate to production. The four layers of costs in a typical cost hierarchy include:

1. Unit-level costs: These costs are directly related to each individual unit of production. Examples include direct materials and direct labor costs.
   
2. Batch-level costs: These costs are incurred for each batch of production. Examples include setup costs and inspection costs for a batch of products.
   
3. Product-level costs: These costs are incurred for each product line or type of product. Examples include advertising and product development costs.
   
4. Facility-level costs: These costs are incurred to support the entire production facility. Examples include rent, utilities, and equipment depreciation.