Answer to Question #154331 in Management for Prabhdeep

Question

Discuss in detail the importance of product costing in price Estimation and profit management

Answer 1

Product costing is the accounting process of determining all the business expenses incurred in the manufacture of company products. These costs include raw materials, labor, wages, and transportation.

A product's price is estimated after considering the cost of producing it and then adding a small mark up. The revenues of a company must exceed its expenses for it to be profitable, so most sales decisions have to be based on cost.

Product costing helps a firm make data-driven decisions which in the long run will translate to higher profits.