A Company That Focuses on Product Differentiation Does Not Need

question 26

True/False

A company that focuses on product differentiation does not need to monitor product costs because if the quality is sufficient, customers will pay the price.

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Definitions:

Unit Product Cost

The total cost (both variable and fixed) to produce a single unit of product.

Contribution Format

A type of income statement that separates variable costs from fixed costs to calculate a company's contribution margin.

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Variable Costing

A ledger maintaining technique that factors in only the variable costs incurred during production (direct materials, direct labor, and variable manufacturing overhead) into product pricing.