Classifying Costs into One of Four Hierarchical Levels Can Facilitate

question 39

Essay

Classifying costs into one of four hierarchical levels can facilitate the identification of relevant costs.Place an "X" in the appropriate column to classify the following costs as Unit-Level,Batch-Level,Product-Level,and Facility-Level.
$$\begin{array} { | l | c | c | c | c | } \hline { \text { Description of Cost } } & \text { Unit- } & \text { Batch- } & \text { Product- } & \text { Facility- } \\\hline & \text { Level } & \text { Level } & \text { Level } & \text { Level } \\\hline \text { Administrative costs }\\\hline \text { Assembly labor } & & & & \\\hline \text { Equipment setup costs } & & & & \\\hline \text { Engineering design } & & & & \\\hline \text { Inspection costs } & & & & \\\hline \text { Direct materials cost } & & & & \\\hline \text { Materials handling cost } & & & & \\\hline \text { Personnel administration and training } & & & & \\\hline \text { Plant manager's salary } & & & & \\\hline \text { Product manager's salary } & & & & \\\hline\end{array}$$

Understand the concept of marginal revenue product (MRP) and its impact on labor and land use decisions by firms.

Comprehend the principles of supply and demand in determining wages and prices in competitive markets.

Grasp the economic rationale behind hiring or using more or less of a factor of production based on its MRP versus its cost.

Recognize the role of elasticity in supply and demand in determining the allocation and pricing of resources.

---

Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Financial Lease

A type of lease wherein the lessee has possession and control of an asset during its significant life but does not own the asset, effectively treating it as a loan with asset as collateral.

CRA

In the context of Canadian taxation, CRA stands for Canada Revenue Agency, the federal agency responsible for tax collection and enforcement.

Lease Payments

Regular payments made by a lessee to a lessor for the use of an asset.