You enjoy making cakes and pastries and have decided to open up a small bakery across from campus. You plan on making a variety of baked items, probably a couple of different batches each day since the processes differ for each variety. You recall from
your managerial accounting class that product costing is important and that there are a few different choices in determining product costs. Would product costing be important for a small operation such as this? Why or why not? If you were to use a product costing system, which one would you use and why?
Product costing is important for a business of any size. An owner needs to know how much each product costs to determine the appropriate sales price and the resulting profit margin. It is also appropriate in determining financing for the business and making production decisions. The product costing system answer might vary depending on the explanation. The most appropriate would be either process or operations costing since the pastries are made in batches and are probably standardized within a batch.
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What will be an ideal response?
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