Cost accounting procedures provide the means to determine product costs
that enable the preparation of meaningful financial statements and other
reports needed to manage a business. The cost accounting information
system must be designed to permit the determination of unit costs as well
as total product costs. For example, the fact that a manufacturer spent
$100,000 for labor in a certain month is not, in itself, meaningful; but if
this labor produced 5,000 finished units, the fact that the cost of labor was
$20 per unit is significant. This figure can be compared to the company’s
unit labor cost for prior periods and, often, to the labor cost of major
competitors.