Managers need to consider variable costs, fixed costs, inventoriable product costs and period costs when setting prices.

Question

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Managers need to consider all of these costs when setting prices in order to ensure that the price covers all costs and generates a profit. Variable costs are costs that vary with the level of production, such as raw materials or labor. Fixed costs are costs that do not vary with the level of production, such as rent or utilities. Inventoriable product costs are costs that are incurred to produce a product and are included in the cost of inventory, such as raw materials, direct labor, and factory overhead. Period costs are costs that are not included in the cost of inventory but are expensed in the period incurred, such as selling and administrative expenses.

Managers Need to Consider Variable Costs, Fixed Costs, Inventoriable Product