Costing refers to the process of determining the total cost of a product or service, including both direct and indirect costs. The final cost of a product or service is important for a variety of reasons, including setting prices, making budgeting decisions, and assessing profitability. There are a number of factors that can affect the cost of a product or service, including the following:
Raw materials: The cost of raw materials can significantly impact the overall cost of a product or service. This is especially true for industries that rely heavily on raw materials, such as manufacturing and construction. The price of raw materials can be influenced by a variety of factors, including supply and demand, transportation costs, and economic conditions.
Labor: The cost of labor is another significant factor that can affect the overall cost of a product or service. This includes both direct labor costs, such as wages and benefits, as well as indirect labor costs, such as training and supervision. The cost of labor can be influenced by a variety of factors, including the local cost of living, the availability of skilled workers, and government regulations.
Overhead: Overhead refers to the indirect costs associated with producing a product or service. These costs can include things like rent, utilities, and insurance. Overhead costs can significantly impact the overall cost of a product or service, especially for businesses that have a high overhead relative to their direct costs.
Taxes: Taxes can also affect the cost of a product or service. Depending on the country or region in which a business operates, taxes can be applied to the cost of raw materials, labor, and overhead. The rate of taxation can significantly impact the overall cost of a product or service.
Competition: The level of competition in an industry can also affect the cost of a product or service. In a highly competitive market, businesses may need to lower their prices in order to remain competitive. Conversely, in a less competitive market, businesses may be able to charge higher prices.
Technology: Advances in technology can also affect the cost of a product or service. For example, the development of new manufacturing techniques or materials may allow businesses to produce products more efficiently, potentially lowering the cost of production.
Market conditions: Economic conditions, such as inflation or deflation, can also affect the cost of a product or service. Inflation, for example, can cause the cost of raw materials, labor, and overhead to increase, which can lead to higher prices for consumers.
In conclusion, there are many factors that can affect the cost of a product or service. Understanding and managing these factors is an important part of the costing process and can help businesses make informed decisions about pricing, budgeting, and profitability.
In the vast majority of cases, modern manufacturing facilities that use quality tools can produce more than acceptable accuracy and precision within their normal range of operations. Firstly, the obvious Ms4 Solved Assignment Rs. Still, there are a few determinants that have enough importance in modern manufacturing enterprises, viz. Another argument in the case for using variable costing is that it could possibly eliminate time-consuming efforts required to allocate fixed overhead. An operation breakdown represents the complete list of all the sequence of operations involved in sewing a specific apparel style. Will your contract manufacturer guarantee it for the life of the project or just the life of the tool? Overpricing will dent its sale and drive its products out of the market.
Theory of Cost: Purpose, Factors and Concept (With Diagram)
Other effects on cost may arise due to external factors over which management has little control. Location of Construction When the location is far away from available resources, it increases the project cost through increased transportation and logistics costs. This made the factory worker thought the variance report was irrelevant and ignored it. Since pricing or costing impacts directly on profitability, so it is decided carefully considering many factors. Decisions Requiring Cost Information 5. Poor use can originate from inadequately engineered designs, inconsistent widths, imprudent cutting etc. A garment merchandiser must confirm it by discussing it with the buyer before providing the final costing.
10 Factors That Influence The Cost of Making Your Product
What are the factors that affect cost control? Therefore, the company will lose its business to its competitors. Moreover, the particular information required varies from one problem to another. Costing of woven fabrics for garment manufacturers is one of the most important aspects of garment production. A change in the process of production, i. According to Cokins and Hicks Accounting Management framework gives business a planned approach to address all factors that will manage accounts interface and todays reality.
Costing in Apparel Industry: Factors, Stages and Elements
The merging of both the company was done in the year 2001. Machines are continuously operating, and there is no downtime. Prevention of infestation by rodents, insects reduces waste and helps in cost control. Production standards are set up as a measure of productivity of labor and operators under standard conditions. All you want is a rough idea of your manufacturing costs so that you can budget and plan.
Provided that it is a safe and ethical place the certificate on the wall might not be essential. This is particularly tough when you are a start-up and you have no previous track record for the manufacturer to go on. In any time segment shorter than the life of a business, however, there is hardly any correspondence between expenses and expenditure. In the short-run, since the level of usage of some inputs is fixed, some costs are fixed also. Therefore, a business can then effectively allocate its resources to the production and sale of more profitable products.
Staff are just getting used to making those initial pieces. Trimmings and Accessories: In this case, a garment merchandiser has to calculate the required trimmings and accessories needed for completing the order. But in the real world, one can take a positive view of costs. Under-pricing may increase sales for a while, but eventually, it will eat away the profits. Along with that the Voodoo Ltd Business Case Study and beverage industry is anticipating significant growth, with a majority of food and beverage executives expecting increases in revenues 84% of executives Thornton, 2013. You acquired a gas cylinder at Rs.
Technological change often leads to a fall in average cost but raises the productivity of existing resources. Fabrication: Before providing the costing of an order to the buyer, a garments merchandiser must take a clear idea regarding the fabrication from the buyer. It is also estimated that Asia will emerge as the biggest market for sourcing of fabrics for the garment and apparel industry. However, in this article, the authors consider only the commercial costing keeping in mind the manufacturing cost and wet processing cost. Another volume consideration is that raw material suppliers can sometimes offer discounts for bulk purchases. Hi-tech machinery is expensive and so the benefits of using it must outweigh the investment in the equipment. Stability and plan ability of output lead to various cost savings.
However, before we discuss various cost concepts, it is necessary to identify at the outset certain general factors which affect cost behaviour in a modern business firm. Cost behaviour is also affected by the variability of the product-mix. Understanding Contractor Costing in the International Power Generation Industry As global demand for power generation continues to grow, there is a growing shift in both the pricing and costing methodologies employed by turnkey contractors. All the above key factors for garments costing are discussed below: 1. To understand why this is the case, you need to visit a factory and watch as the production takes place. Components of Apparel Costing: Normally, the costing is prepared by considering the raw material cost, market demand, operating cost of the industry and forecasted profit of the firm and also considering the expectations of the buyer.
