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 facility-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 facility-level cost?

Quizplus · Accepted Answer

Facility-level costs are costs that are incurred to support the entire production process regardless of the number of units produced. They are not impacted by changes in the volume of production. The company president's salary is an example of a facility-level cost as it is incurred to support the entire production process and is not affected by changes in the number of units produced. The other costs listed, inspection costs, shipping and handling, and materials cost, are all examples of unit-level costs as they vary with the number of units produced.

Easton Company Makes and Sells Scooters