Classifying Costs into One of Four Hierarchical Levels Can Facilitate

question 109

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. $$\begin{array} { | l | c | c | c | c | } \hline { \text { Description of Cost } } & \text { Unit- } & \text { Batch- } & \text { Product- } & \text { Facility- } \\\hline & \text { Level } & \text { Level } & \text { Level } & \text { Level } \\\hline \text { Administrative costs } & & & & \\\hline \text { Assembly labor } & & & & \\\hline \text { Equipment setup costs } & & & & \\\hline \text { Engineering design } & & & & \\\hline \text { Inspection costs } & & & & \\\hline \text { Direct materials cost } & & & & \\\hline \text { Materials handling cost } & & & & \\\hline \text { Personnel administration and training } & & & & \\\hline \text { Plant manager's salary } & & & & \\\hline \text { Product manager's salary } & & & & \\\hline\end{array}$$

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Definitions:

Standard Deviation

An indicator of the degree of spread or divergence from the average in a collection of data, showing the extent to which the data points vary from their average value.

Sample Mean

The average value of the observations in a sample, used as an estimate of the population mean, calculated by summing all observations and dividing by the number of observations.

Normal Curve

A symmetric, bell-shaped curve that represents the distribution of many types of data; most scores are near the average, and frequencies decrease as you move away from the center.

Binomial Random Variable

A type of random variable that arises from a binomial experiment, representing the number of successes in a fixed number of independent Bernoulli trials.