Plan - Costing Products/Services

Components of Manufactured Costs
If you are manufacturing a product you will need to know what your production costs are because they will affect the figures you set as your prices.

There are 3 groups of costs involved in manufacturing – raw materials, labour costs and overheads.

1. Raw materials: This is the cost of the materials you use in the production of your products.
   
   
2. Labour Costs: This is the cost for the wages and salaries directly involved in the production process.
   
   
3. Overheads: These are the rest of the costs of the business, such as administration expenses, office costs, rent, power, etc that are not directly related to the production function, but they are part of the business expenses.

These costs have to be brought into the overall cost of production and are generally allocated on the basis of a certain rate for every direct labour hour that goes into the production.

Elements when Costing your Products
It is important that ...