Describe how firms use service and product cost information.
What will be an ideal response?
Answers will vary.
Product and service cost information is used in financial reporting, managerial accounting, and contract negotiations. Companies are required by generally accepted accounting principles to report their service and product costs in their financial statements. Product and service cost information is used in managerial accounting for planning and control purposes. For example, cost information is used in pricing, product mix, special orders, outsourcing, and product elimination decisions, to name just a few applications. Service and product cost information is used by government agencies to regulate rates set by public service entities such as utilities and hospitals. The information is also critical in those situations where the firm uses a cost-plus pricing system to bid on jobs.
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What will be an ideal response?
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