Product Costing= determining the cost associated with a product
-Reasons for product costing-Variable, fixed and mixed
HL: 2007, 2003
Product Costing
1. Product = anything that is manufactured for sale (e.g. iPhone)
2. Product Costing = determining the cost associated with a product
iPhone 5
Materials = Manufacturing Cost =
Product Costing
iPhone 5Materials = $199 = €155Manufacturing Cost = $8 = €6
Total = $207 = €161
Product Costing
3. Manufacturing Costs incurred:
+Direct Labour+Direct Expenses = Prime Cost (= direct cost excl. fixed
costs)
+ Variable Factory Overheads+ Fixed Factory Overheads= Factory or Manufacturing or Production Cost
Product Costing
4. Reasons for Product Costing:(i) Fixing Selling Price (note: Selling Price = Cost Price +
Profit)(ii) Control = comparing budgeted costs with actual (iii) Stock Valuation = to complete trading and profit and
loss accounts
Product Costing
5. Variable Vs Fixed Vs Mixed
For Example:(i) Direct Materials(ii) Direct Wages(iii) Overheads(iv) Administration Expenses
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