Full cost definition
/What is Full Cost?
Full cost is the aggregation of all costs associated with a product or other cost object . These costs include both the direct costs and indirect costs of production, but do not include selling, general and administrative expenses . The cost assigned to inventory when it is reported in a company’s balance sheet is its full cost.
How to Use Full Cost
The full cost of a product is used as the minimum threshold for setting the long-term price of a product; the intent is to set price points that will ensure that a company’s costs will be completely offset by the resulting revenues . Otherwise, price points are likely to be too low, resulting in excessively low profits .
