Which of the following is a purpose of product costing?

• A. To establish the selling price for tendering.
• B. To estimate inflation.
• C. To compare costs budget vs actual.
• D. To allocate dividends.

Answer: (C)

Product costing is about capturing all costs of producing a product so managers can plan, control, and evaluate performance. A key use is to compare what was budgeted for costs with what was actually spent, i.e., budgeted versus actual costs, to identify variances, spot inefficiencies, and take corrective action. This helps manage profitability and keep production on track.

Establishing a selling price for tendering relies on pricing decisions rather than the ongoing cost-tracking focus of product costing. Estimating inflation is a broader economic measure, not tied to the cost of producing a specific product. Allocating dividends is a corporate finance decision about distributing profits, not about costing products.