Question

What is a product costing system and what is its purpose?

Answer 1

Solution:

Product costing can be defined as a process of assigning total amount of cost to a particular product based on specific purpose of the management of organization.

There various purpose of product costing and some of are as under:

1. Determination of sales price of product on the basis of product cost.

2. Product mix decesion in case of constrained resources.

3. Reporting cost of goods sold in financial statement.

4. Inter unit transfer

5. Buy vs make decesion

6. Incremental analysis of acceptance of special order.