For Each Item Listed Select the Appropriate Purpose of Cost

question 113

Short Answer

For each item listed select the appropriate purpose of cost allocation from the list below. A purpose may be used more than once.
1. To cost a product at a fair price for government contracts
2. To encourage simpler product design
3. To decide on an appropriate selling price for a special-order product
4. To cost inventories for reporting on a company's tax return
5. To encourage the sales department to focus on high-margin products
6. To evaluate a make or buy decision
7. To cost inventories for the balance sheet
8. To decide whether to add or delete a product line
Purposes of cost allocation:
a. To provide information for economic decisions
b. To motivate managers and other employees
c. To justify costs or compute reimbursement amounts
d. To measure income and assets

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Definitions:

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