How to calculate cost of goods

The cost of production of services or goods is the total expression of the costs in monetary terms arising in the process of their manufacture and sale. This is the cost of the product excluding the profits of the enterprise that cannot be more wholesale and retail prices, as this will cause loss to the organization. To calculate the cost of production, it is necessary to study the main methods and the existing cost items which are taken into account.

Classification of cost items that form cost of goods

For the manufacture of any product needs raw materials, labour, energy, equipment and tools. To calculate the cost of production, should take into account all cost items that arise in the production process. To do this, according to the technology of production all costs associated with the manufacture, bring into a single document - a costing.

The main costs included in the costing are:

- materials, raw materials and semi-finished products used in the production process a certain number of products (thing, thousand, ton, liter);

- wages of employees who are involved directly in the manufacture of the product;

- social and insurance contributions from the wages of employees engaged in the manufacture of products;

- depreciation of fixed assets involved in production;

- marketing costs, advertising of the goods.

The types of costs and their calculation

To calculate the cost of goods in several ways:

1. Complete planned cost. This figure is calculated by adding variable and fixed costs. Variable costs include materials, energy, wages used for the manufacture of the product. Permanent costs include the costs of administration, repair of buildings, that is those costs that must be considered regardless of the production volume. Fixed costs are determined by adding and dividing by the total number of products.

2. The full actual cost. In this case, to calculate the cost, take into account costs that were actually incurred by the enterprise for production in prior periods. But to calculate production costs correctly, you need to take into account the price fluctuations for materials and energy, and possible wage growth.

3. The unit cost of production. The indicator can be calculated according to the norms provided for the manufacture of a specific product by multiplying them by the value of the resource and subsequent addition of all costs. The second method of calculation involves the summation of all costs for manufacturing a particular type of product and divide the resulting figure by the number of the released product.

Depending on the type of business and accounting, each company chooses how to calculate the production cost to accurately account for all expended resources and display them in price.

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