Easton Company makes and sells scooters.Easton incurred the following costs in its most recent fiscal year: $\begin{array}{c}\text { Cost Items Appearing on the Income Statement }\\begin{array}{|l|l|}
\hline\text { Materials cost ( } \$ 10 \text { per unit) } & \text { Depreciation on manufacturing equipment } \
\hline \text { Company president's salary } & \text { Salaries of administrative personnel } \
\hline \text { Labor cost ( } \$ 4 \text { per unit) } & \text { Research and development costs } \
\hline \text { Advertising costs }(150,000 \text { per year) } & \text { Real estate taxes on factory } \
\hline \text { Shipping and handling (\$0.15 per unit) } & \text { Inspection costs } \
\hline
\end{array}\end{array}$ 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: $\begin{array}{c}\text { Cost Items Appearing on the Income Statement }\\begin{array}{|l|l|}
\hline\text { Materials cost ( } \$ 10 \text { per unit) } & \text { Depreciation on manufacturing equipment } \
\hline \text { Company president's salary } & \text { Salaries of administrative personnel } \
\hline \text { Labor cost ( } \$ 4 \text { per unit) } & \text { Research and development costs } \
\hline \text { Advertising costs }(150,000 \text { per year) } & \text { Real estate taxes on factory } \
\hline \text { Shipping and handling (\$0.15 per unit) } & \text { Inspection costs } \
\hline
\end{array}\end{array}$  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 producing each unit of output. In this case, materials cost is the only cost that is directly related to producing each scooter. Company president's salary, depreciation on manufacturing equipment, and real estate taxes on factory are all examples of other types of costs such as batch-level, product-level, or facility-level costs.

Easton Company Makes and Sells Scooters Easton Can Currently Purchase the Scooters It Makes from Another