In a service industry adopting operating costing, how can the organization ensure effective cost control through the application of cost determination? Question 14Answer a. Regularly revising the variable costs. b. Aligning costs with service objectives. c. Eliminating all fixed costs. d. Focusing solely on reducing production volume.
The best answer to ensure effective cost control through the application of cost determination in a service industry adopting operating costing is:
b. Aligning costs with service objectives.
This approach ensures that costs are managed in a way that supports the overall goals and objectives of the service organization, leading to more effective cost control and resource allocation. Regularly revising variable costs (option a) can be helpful, but it does not address the broader alignment with service objectives. Eliminating all fixed costs (option c) is not practical or beneficial, as some fixed costs are necessary for operations. Focusing solely on reducing production volume (option d) may not be sustainable or effective in the long term.