The uses of product costs in decision making in British manufacturing industry

This paper assess the use of product costs in decision-making. Using questionnaire responses and interviews with British management accountants, product costs are used all the time in decision making to support the profit motive in profit/investment centres and to control costs in cost centres. They are used only sometimes in decision making when there are limitations in the product costing system and/or the market has a greater role in decision-making. Operating units use product costs as attention directing information in decision making: to highlight loss making products for special studies to identify any further information required, because market-based information has an important role in decision making and when product costs are not accurate enough to use directly in decision-making. Operating units use product costs directly in decision making because they have confidence in the accuracy of costs or because of ignorance of using the information as attention directing information.