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 facility-level cost?
A) Inspection costs
B) Shipping and handling
C) Materials cost
D) Company president's salary

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 facility-level cost?
A) Inspection costs
B) Shipping and handling
C) Materials cost
D) Company president's salary

Quizplus · Accepted Answer

Facility-level costs are costs incurred to maintain the overall infrastructure of a company, such as salaries of top executives, rent, utilities, and equipment maintenance. The company president's salary is an example of a facility-level cost. The other options, inspection costs, shipping and handling, and materials cost are more likely to be classified as unit-level costs, which are costs associated with producing each unit of a product.

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