In reviewing this exhibit keep in mind that terms can

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Unformatted text preview: nto production centers. This way of viewing costs has some limitations. Specifically, whether a cost is direct or indirect says little about its actual behavior as the volume of activity in a production center increases or decreases. For this reason, full cost information is not especially useful for making certain kinds of decisions, called “alternative choice decisions.” The costs appropriate for these decisions are discussed in the next two chapters. 2. This chapter has only covered the “first stage” of the cost accounting effort. In this stage, we define cost centers and allocate service center costs into production or revenue centers. In the “second stage,” we attached production center costs to the cost objects passing through those centers, so that we know the full cost of each. We did this in a minor way with Lawn Care, Inc. However, when we move into a manufacturing setting this activity becomes considerably more tricky; it is discussed in Chapters 4 and 5. ____________________________________________________________________________________________________________ David W. Young • Management Accounting for Managers • Chapt...
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