Easton Company makes and sells scooters. Easton incurred the following costs in its most recent fiscal year: Easton can currently purchase the scooters it makes from another company. If the company purchases the scooters, Easton would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a unit-level cost?

Question

Easton Company makes and sells scooters. Easton incurred the following costs in its most recent fiscal year:  Easton can currently purchase the scooters it makes from another company. If the company purchases the scooters, Easton would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified as a unit-level cost?

Quizplus · Accepted Answer

Unit-level costs are those that are directly related to the production of each unit of the product. The materials cost is directly related to the production of each scooter and hence is a unit-level cost. The company president's salary and real estate taxes on the factory are facility-level costs and depreciation on manufacturing equipment is batch-level cost as it is related to a group of scooters produced.

Easton Company Makes and Sells Scooters