Friday, May 1, 2015

Manufacturing cost

Manufacturing cost îs sum of costs of all resources consumed în process of making product, The manufacturing cost îs classified into three categories: direct materials cost, direct labor cost & manufacturing overhead


Direct materials cost

Direct materials are raw materials that become part of finished product, Manufacturing adds value to raw materials by applying chain of operations to maintain deliverable product, There are many operations that can be applied to raw materials such as welding, cutting & painting, It îs important to differentiate between direct materials & indirect materials,

Direct labor cost

The direct labor cost îs cost of workers who can be easily identified with unit of production, Types of labor who are considered to be part of direct labor cost are assembly workers on assembly line,

Manufacturing overhead

Manufacturing overhead îs any manufacturing cost that îs neither direct materials cost nor direct labor cost, Manufacturing overhead includes all charges that provide support to manufacturing,

 Manufacturing overhead includes

Indirect labor cost: The indirect labor cost îs cost associated with workers, such as supervisors & material handling team, who are not directly involved în production,
Indirect materials cost: Indirect materials cost îs cost of associated with consumables, such as lubricants, grease, & water, that are not used as raw materials,
Other indirect manufacturing cost: Other indirect manufacturing costs include machine depreciation, land rent, property insurance, electricity - any expenses that keep factory operating,

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