Product-level cost

Definition

Product-level costs are expenses associated with activities performed to support a particular product line, regardless of the number of units produced. These costs include design, research and development, and marketing specific to that product.

5 Must Know Facts For Your Next Test

1. Product-level costs do not vary with the number of units produced.
2. Examples include product design and engineering changes.
3. These costs are often included in activity-based costing systems.
4. Product-level costs can impact pricing decisions for individual products.
5. They are different from unit-level and batch-level costs which vary with production volume.

Review Questions

• What types of activities are considered when calculating product-level costs?
• How do product-level costs differ from unit-level costs in terms of variability?
• Why is it important to allocate product-level costs accurately in managerial accounting?

Related terms

Activity-Based Costing: A costing method that assigns overhead and indirect costs to related products and services based on their usage of resources.

Unit-Level Costs: Costs incurred for every single unit produced, such as direct materials and labor.

Batch-Level Costs: Costs associated with a group or batch of units but not each individual unit, like setup or inspection fees.