Question

Mel Gibbeson has recently graduated from a business school and has joined the family business as an accountant. At the first management meeting with production, marketing and sales, a great deal of time was spent discussing the unit cost of products. Required: What kinds of decisions can managers make using the unit cost information?

Answer 1

Unit costs refers to the cost incurred to manufacture, market and sale a single unit of a product. The unit cost is very important information based on which the managers take various decisions. It helps managers to help where to manufacture or purchase a particular products based on relevant costs. It also helps managers to evaluate whether to outsource a particular activity or carry it inhouse to make the unit cost per unit effective. It helps managers to find how much is the irrelevant and relevant cost in the unit cost of a product. So we can conclude that the unit cost is really very important for the managers to take decisions.