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In: Accounting

The question is: Companies assign costs to products and services to: ( Select all that apply)...

The question is:

Companies assign costs to products and services to: ( Select all that apply)

A. Determine the best supplier of raw materials.

B. Understand product profitability

C. Establish selling prices.

D. value ending inventory

I believe it is B, C & D. I am just not sure if it is A as well?? I will paste some explanation given.

Companies usually assign costs to their products and services for two main reasons. First, it helps them fulfill their planning, controlling, and decision-making responsibilities. For example, a company may use product cost information to better understand each product’s profitability or to establish each product’s selling price. Second, it helps them determine the value of ending inventories and cost of goods sold for external reporting purposes. The costs attached to products that have not been sold are included in ending inventories on the balance sheet, whereas the costs attached to units that have been sold are included in cost of goods sold on the income statement.

It is very common for external financial reporting requirements to heavily influence how companies assign costs to their products and services.Because most countries (including the United States) require some form of absorption costing for external financial reports, many companies use some form of absorption costing for product costing purposes. In absorption costing, all manufacturing costs, both fixed and variable, are assigned to units of product—units are said to fully absorb manufacturing costs. Conversely, all nonmanufacturing costs are treated as period costs and they are not assigned to units of product.

This chapter and the next explain a common type of absorption costing system known as job-order costing. In this chapter we’ll discuss the role of job-order costing systems in planning, control, and decision making. Our focus will be on assigning manufacturing costs to individual jobs. In the next chapter, we will explain how job-order costing systems can be used to determine the value of ending inventories and cost of goods sold for external reporting purposes.Thank you!

Expert Solution

Company assign cost to products and services to :-

B .Understand product profitability

C. Establishing selling price

D .Value ending inventory.

Assignment of cost to product and service has nothing to do with determining the best supplier of raw material. As we determine best supplier of raw material on the basis of price of raw material he is charging from us and the quality of raw material he is providing. Price of raw material is already available to compare. Note that assignment is a next step where we put all direct and indirect cost againstbeach product and service and then add a margin to determine selling price, find out cost of ending inventory available at the end and find out how much profit we have made by reducing all cost.

This, determining best supplier of raw material is a very initial stage whose data is readily available with is and assignment of cost has nothing to do with determining best supplier of raw material..

So correct answer is B, C & D only.

ekkarill92 answered 2 years ago

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