Give examples of three different levels of costs in a customer-cost hierarchy.

Answer:

1.Customer output-unit-level costs—costs of activities to sell each unit (case) to a customer. An example is product-handling costs of each case sold. 2. Customer batch-level costs—costs of activities that are related to a group of units (cases) sold to a customer. Examples are costs incurred to process orders or to make deliveries. 3. Customer-sustaining costs—costs of activities to support individual customers, regardless of the number of units or batches of product delivered to the customer. Examples are costs of visits to customers or costs of displays at customer sites. 4.Distribution-channel costs—costs of activities related to a particular distribution channel rather than to each unit of product, each batch of product, or specific customers. An example is the salary of the manager of Spring’s retail distribution channel. 5.Corporate-sustaining costs—costs of activities that cannot be traced to individual customers or distribution channels. Examples are top management and general administration costs.