=+6-26 K Cost hierarchy OBJECTIVES 6, 7 Scope Ltd manufactures iPod speakers for several well-known companies. The speakers differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2013:

a Indirect manufacturing labour costs, such as supervision that supports direct manufacturing labour, $1200000 b Procurement costs of placing purchase orders, receiving materials and paying suppliers related to the number of purchase orders placed, $600000 c Cost of indirect materials, $350000 d Costs incurred to set up machines each time a different product needs to be manufactured, $700000 e Designing processes, drawing process charts, making engineering process changes for outputs, $900000 f Machine-related overhead costs, such as depreciation, maintenance, production engineering, $1200000 (these resources relate to the activity of running the machines)

g Plant management, plant rent and plant insurance, $950000 Required 1 Classify each of the preceding costs as output unit level, batch level, product sustaining or organisation sustaining. Explain each answer.