different costs for different purposes

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In management accounting, the principle that the management of an organization is likely to need different information, and thus different costs, for the various activities it carries out, especially when making decisions. For example, when calculating the price of a product on a cost-plus basis, management would need to ensure that all costs, both fixed and variable, are charged to the product. On the other hand, in determining whether or not additional units of a product should be produced, only the variable costs would be relevant to that decision.

Subjects: Accounting.

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