Pricing one of the basic functions of cost

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Unformatted text preview: costs. There even is disagreement as to whether full cost is the most appropriate calculation. Indeed, many managers and accountants believe that a computation of full costs is inherently distorted, and therefore of little value for management’s decision-making purposes. Nevertheless, for purposes of this chapter, we will assume that senior management wishes to know the full cost of providing a particular service, and we will look at the choices it must make to arrive at that figure. ORGANIZATION OF THE CHAPTER The chapter begins with a discussion of the uses of full cost information. It then turns to the broad set of issues that must be considered in calculating costs. Next, we look conceptually at the factors that influence the use of resources, linking cost accounting to the economist’s three factors of production: land, labor, and capital. Following this, we turn to an assessment of the basic decisions that must be made in calculating full costs, or the cost accounting methodology. The chapter concludes by lo...
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