Chapter 16
Accounting for Costs
IN THIS CHAPTER
Measuring costs: the second most important thing accountants do
Recognizing the different needs for cost information
Determining the right costs for different purposes
Assembling the product cost of manufacturers
Padding profit by producing too many products
You could argue that measuring costs is the second most important thing accountants do, right after measuring profit. In fact, you need to measure costs in order to measure profit. But really, can measuring a cost be very complicated? You just take numbers off a purchase invoice and call it a day, right? Not if your business manufactures the products you sell, that’s for sure! In this chapter, we demonstrate that a cost, any cost, is not as obvious and clear-cut as you may think. Yet obviously, costs are extremely important to businesses and other organizations.
Consider an example close to home: Suppose you just returned from the grocery store with several items in the bag. What’s ...
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