price costing Flashcards
In managerial accounting, the term “?” refers to overall production cost that is incurred to manufacture products or provide services.
The precise knowledge of the cost of production helps the management to decide the price of the product in order to earn the desired profitability
product cost
These are materials and supplies that are consumed
during the manufacture of a product, and which are directly identified with the product.
Items designated as direct materials are usually listed in the bill of materials file for a product.
DIRECT MATERIALS
tip for direct material
only focus on raw materials
tip for direct labor
Only include wages and benefits for those directly making the product.
Do not include wages for support staff like security, maintenance, or administrative personnel
These are costs associated with paying workers to make a product or provide a service. The workers must be clearly involved in producing the product or providing the service.
DIRECT LABOR
These are materials used in the production process, but which cannot be linked to a specific product or job. Thus they are consumed as part of the production process, but are not integrated in substantial amounts into a product or job.
INDIRECT MATERIALS
tip for indirect material
Other Examples: Cleaning supplies, small tools, and safety equipment.
Focus on Usage: Determine if the material is used directly in the product or just supports the production process.
Indirect materials are usually cheaper and used in smaller amounts.
It is a category of indirect costs and refers to those employees that assist the direct labor in the performance of their work.
It is a category of indirect costs and refers to those employees that assist the direct labor in the performance of their work.
INDIRECT LABOR
They are not involved directly in the service or production process. These include human resources, accountants, administration, etc
INDIRECT LABOR
tip for indirect labor
Identify employees who support the production process but do not directly create the product.
Ensure you separate direct labor (hands-on production) from indirect labor (support roles).
It refers to the business expenses not directly attributed to creating product or service. It can be fixed, variable or hybrid of both.
OVERHEAD COSTS
tips for identifyinv overhead cost: sometimes it include rent, utilities, repair and maintenance, etc.
formula for manufacturing cost
MOC= Indirect Materials Cost + Indirect Labor Costs + Overhead Costs.
Product Cost Formula
Direct Material+ Direct labor+ MOC= Product Cost
fyi: given na ang number of units produced
A _____ is a total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service.
___ are synonymous with_________ (COGS).
This includes all fixed and variable costs associated with the production of a good or service.
unit cost
cost of goods sold
These are production expenses that are not dependent on volume of units produced.
FIXED COST
tips for getting the fixed cost: sometimes Examples are rent, insurance, depreciation, and certain salaries.
____ vary depending on the level of output produced. A company’s variable costs increase and decrease with its production volume. When production goes up, this will increase. If volume goes down, this will decrease.
Variable costs
tip for getting the variable cost is Identify costs that increase or decrease with production volume.
the cost goes up when you make more products and goes down when you make fewer products, it’s a variable cost.
Example: The cost of leather and stitching thread increases as you make more shoes.
how many products you make, it’s not a variable cost (it’s a fixed cost).
Example: The rent for your factory stays the same whether you make 10 shoes or 100 shoes.
refers to the value that is added to the cost of the product. The value is added to the unit cost to determine the selling price of a product. It is usually expressed in percentage.
Mark-up
The ____ of a product or service is the seller’s final price – how much the customer pays for something. It varies depending on the how much buyers are willing to pay, or how much are spent on production, and other variables affecting price.
SELLING PRICE
si selling price, need muna ng mark up. but dont worry ksi given na ang markup. or not? haha bhala na te, basta ano analyze mo nalang
quick tip for getting the selling prices
COMPUTE FOR THE SELLING PRICE OF THE LEATHER SHOES IF THE DESIRED MARK-UP IS 50%. - given
ANSWER P 2,461.50- total selling price
P1,641 (unit cost) doubled up again with+ (P1,641 X 0.5) : si 0.5 50% sya in decimal form
COMPUTE FOR THE MARK-UP OF THE LEATHER SHOES IF THE SELLING PRICE IS P2,999.
ANSWER MUST BE WITH 2 DECIMAL POINTS.📌
ANSWER 82.75% (P2,999 - P1,641) / P1,641 X 100
SELLING PRICE FORMULA:
SELLING PRICE =
UNIT COST + MARK-UP
MARK-UP FORMULA:
MARK-UP =
SELLING PRICE – UNIT COST / UNIT COST X 100
