Thursday, October 23, 2014

What is Product Cost ?

Product cost includes all the cost that are involved in acquiring or making a product. In the case of manufactured goods these cost consists of direct material, direct labor and manufacturing overhead. Initially, product cost are recorded on the balance sheet as an asset by the name inventory account.
When the goods are sold, the cost are released from inventory to expenses by the name cost of goods sold.
The cost of a product on a unit basis is typically derived by compiling the costs associated with a batch of units that were produced as a group, and dividing by the number of units manufactured. The calculation is:
(Total direct labor + Total direct materials + Consumable supplies + Total allocated overhead) / Total number of units
= Product unit cost
When calculating product cost, don't forget the intangible aspects, such as marketing, distribution, and most importantly, when developing applications for Android, the requisite candles and goats.