For pricing decisions, full product costs:
A)include all costs that are traceable to the product
B)include all manufacturing and selling costs
C)include all direct costs plus an appropriate allocation of the indirect costs of all business functions
D)allow for the highest possible product prices

Question

Quizplus · Accepted Answer

Full product costs should include all direct costs related to the production of the product, as well as an appropriate allocation of the indirect costs of all business functions that contribute to the production and sale of the product. This allows for a more accurate and comprehensive analysis of the true cost of producing and selling the product, and helps ensure that pricing decisions are based on all relevant costs. Including all costs that are traceable to the product (option A) may not capture all indirect costs, and including all manufacturing and selling costs (option B) may inflate the cost of the product. Allowing for the highest possible product prices (option D) is not a valid approach to pricing decisions, as prices should be determined based on an analysis of costs, competition, and customer demand.

For Pricing Decisions, Full Product Costs