Why is it important to classify costs into a cost hierarchy?

A$.$ It is important to classify costs into a cost hierarchy because it allows managers to evaluate the importance of costs in the manufacturing process. If costs were not classified into a cost hierarchy, managers would be unable to assess the importance of each cost incurred in manufacturing the product.

B$.$ It is important to classify costs into a cost hierarchy because costs in different cost pools relate to different cost$-$allocation bases and not all cost$-$allocation bases are unit level. If costs were not classified into a cost hierarchy, the alternative would be to consider all costs as unit$-$level costs, leading to misallocation of those costs that are not unit$-$level costs.

C$.$ It is important to classify costs into a cost hierarchy because although costs in different cost pools relate to different cost$-$allocation bases, all cost$-$allocation bases are unit$-$level. Classifying costs into a cost hierarchy allows managers to spread costs evenly across all units.

costs into a cost hierarchy allows managers to spread costs evenly across all units.