Which of the following is a purpose of product costing?

• A. To establish the selling price for tendering.
• B. To determine annual interest.
• C. To set corporate tax rate.
• D. To control costs.

Answer: (D)

Product costing is about turning production into clear cost information so managers can monitor and influence what is being spent on making goods. The central aim is to control costs: by assigning direct materials, direct labour, and overhead to each product, you get a cost per unit and can compare actual spending with budgets or standards. When variances appear, managers can investigate and take corrective action to reduce waste, inefficiency, or overruns, keeping production costs in line with plans.

Other uses of cost data—like helping to set a bid price for tendering or informing decisions about financing and taxes—exist, but they aren’t the primary purpose of product costing. Tender pricing uses cost information as one input among many; taxes and interest are determined by laws and financial planning, not by product costing alone.