PRODUCT COSTING

1
PRODUCT COSTING

• Süleyman ÜSTEK
• Industrial Engineering Department, Dokuz Eylül
  University, Turkey
•  

2
WHAT IS COST?

• To have a good or service what is put forward as
  direct and indirect expenditures is the total
  cost.

3

• All the goods we use daily to meet our needs has
  a cost to come ready to use. Elements of cost
  producers of goods or services should know the
  cost of their goods or services. If they do not
  know their enterprises will be in difficult
  position to continue. Producers know the
  elements of cost, as well as lowering the cost
  factors.

4
COST FACTORS

• Raw Materials
• Supporting Materials
• General Expenses
• Depreciation
• Labor
• Direct labor
• Indirect Labor
• Maintenance and Repair Expenses
• General Operating Expenses

5
RAW MATERIALS

• Each production activity is carried out from the
  forces of nature and natural materials are
  obtained. In this regard, the underground and
  above ground resources, minerals, forests, soil,
  air, sun are the realization of the production
  sources. Soil iron ore, cotton yarn, sugar beet
  are production examples of the raw material.

6
SUPPORTING MATERIALS

• These materials help to keep the structure of the
  materials or other substances used to make the
  production. Example The paint used in the
  cotton, the machine used to produce coal, coal
  used to produce iron.

7
GENERAL EXPENSES

• Business activities in order to continue, like
  lighting, heating, transport, communications,
  stationery, and so on are classified as general
  expenses.

8
DEPRECIATION

• Some machine tools and materials are used to make
  production. Wear out over time and economic life
  of equipment used is a loss and it has a cost.
  The cost of this lost for the production of goods
  is added to the cost items as the amount of
  depreciation.

9
LABOR

• For the realization of the production, what is
  paid for the body and brain activities of people
  is called wages. Cost of labor are of two kinds
• Direct labor The cost and production time for
  the production of consumable goods that can be
  found by multiplying the labor.
• Indirect Labor On goods produced in non-business
  activities, paid wages. Transportation, security,
  such as fees.

10
MAINTENANCE AND REPAIR EXPENSES

• Periodically in the maintenance of machine tools
  and devices used is done, or machines might sour
  from time to time, these costs are added to the
  cost.

11
GENERAL OPERATING EXPENSES

• Business activities such as rent and insurance
  are examples for general operating expenses.

12
TYPES OF COST

• There are various methods for calculating the
  cost. These methods depend on the objectives of
  the business, the type used in the production,
  are classified according to the procedures used
  in cost calculations.

13
According to the form of business operation

• Serial or continuous cost Without a break in a
  factory constantly refers to the cost of
  production calculated in the event.
• Tracks cost If more than one workshop production
  of a commodity is made through the exit of the
  calculated cost of each workshop. Example A
  car's engine, chassis, bodywork, rubber parts,
  such as workshops, produced a separate
  installation costs are combined and calculated
  accordingly.

14
Cost Calculation by the time of

• Pre-cost Pre-production of the cost
• Mid-costThe work before the end of a stage
  production of the goods are calculated as
  mid-cost.
• Last cost Calculated after the end of the
  business.

15
Cost calculation method by

• Cost of Supply The main inputs required for
  production, but these are outside of the vehicle,
  insurance, commission and expenses.
• Industrial Cost Materials and labor used in
  production, depreciation, cost of adding
  overhead.

16

• Commercial Cost Costs like industrial packaging,
  advertising expenses, are industrial costs.
• Standard Cost Certain specific conditions,
  activity level and the cost of the service by a
  direct raw materials and finished goods and
  materials, direct labor, manufacturing costs and
  general cost of pre-determined standard cost is
  based on scientific principles.

17
MINUS COST FACTORS

• Business and the location of the right to be
  selected taking into account all economic
  factors,
• Easy and cheap availability of raw and auxiliary
  materials,
• Cheap and easy finding qualified labor force,
• Business in the presence of different economic
  means, (transportation energy, market)

18

• Import and export facilities for the production,
• Developed infrastructure (electricity, water,
  lighting, heating, facilities)
• Used machine tools in production and repair
  instrument,
• Main and side industries that benefit from
  opportunities.

19
AN EXAMPLE OF COST CALCULATION

• QUESTION 25X25X1mm. profile of the pipe will be
  manufactured in a standard chair . Chair, table
  and back gauge table seating order will be made.
  Calculate the cost of a standard part of the
  chair frame?

20
ANSWER

• List of direct material used in the construction
  of the chair
• Name of material Quantity Unit
  Price Amount
• 25x25x1mm. 6.5 mt 5 TL
  32.50 TL
• profile pipe
• 2.5 mm. Electrode 5 pcs 0.05 TL
  0.25 TL
• Nuts 10 pcs 0.05 TL
  0.50 TL
• Paint Primer 0.2 kg 12.50 TL
  2.50 TL
• Oil Paint 0.2 kg
  12.50 TL 2.50 TL
• Bolt ¼ 8 pcs
  0.50 TL 4.00 TL
• Chair table 1 pcs
  7.75 TL 7.75 TL
• (to be ready)

21

• Material Total
  50.00 TL
• General Expenses (electric light cleaning)
  2 1.00 TL
• Sub Total
  51.00 TL
• Depreciation 5
  2.55 TL
• Sub Total
  53.55 TL
• Profit 25
  14.45 TL
• GRAND TOTAL
  68.00 TL
• 68.00 TL. Sales price of the chair.

22
THANKS FOR LISTENING