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Unformatted text preview: mmed to produce the final cost object. For example, at Lawncare, Inc., whereas the final cost object in the mowing category is a mown lawn, the intermediate cost object would be an hour. In this regard, an important question is whether the cost of an hour of mowing is the same as the cost of an hour of special projects. To answer this question, we need to examine some of the other cost accounting choices. Decision #2. Determining Cost Centers Cost centers can be thought of as categories used to collect cost information, and therefore affect how cost data will be accumulated. To best understand how they work, consider again the organization that provides a single product or service. The organization would treat itself as a single cost center, thereby creating a relatively simple cost accounting system. In this case, the category used to collect cost information would be the organization itself. If it provides more than one service or product, the organization would need to subdivide itself into several cost centers—such as manufacturing, administration, maintenance, and the like—for purpose of the cost accounti...
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