Components and elements of Cost
Prime Cost:
Prime Cost is the sum of all the direct costs involved in the production of a product. It includes the cost of raw materials, labor, and any other expenses directly related to the manufacturing process. The formula to calculate prime cost is:
Prime Cost = Raw Material Cost + Direct Labor Cost + Direct Expenses
Factory Cost: Factory Cost is the sum of all the direct and indirect costs involved in the production of a product. It includes the cost of raw materials, labor, and any other expenses directly related to the manufacturing process, as well as indirect costs such as factory rent, maintenance, and depreciation of machinery. The formula to calculate factory cost is:
Factory Cost = Prime Cost + Manufacturing Overhead Expenses
Production Cost: Production Cost is the total cost involved in the production of a product, including both direct and indirect costs. It includes the cost of raw materials, labor, and any other expenses directly related to the manufacturing process, as well as indirect costs such as factory rent, maintenance, and depreciation of machinery. The formula to calculate production cost is:
Production Cost = Factory Cost + Non-Manufacturing Expenses
Total Cost: Total Cost is the sum of all the costs involved in producing and selling a product. It includes the cost of raw materials, labor, manufacturing overheads, non-manufacturing expenses, and any other expenses associated with the product. The formula to calculate total cost is:
Total Cost = Production Cost + Selling and Distribution Expenses
Selling Price: Selling Price is the price at which a product is sold to customers. It is usually higher than the production cost and includes a profit margin for the manufacturer or seller. The formula to calculate selling price is:
Comments
Post a Comment