Advantages of making a production cost budget ✨

Advantages of making a production cost budget ✨

What is the production cost statement or Manufacturing Cost Statement?

That is, that entrepreneurs relating to the sale of goods must be prepared to calculate the cost of producing finished goods for each period before making the profit and loss statement. and statement of financial position

The cost of production includes

- Direct raw materials

It is an object that is mainly used in production. But all materials used in production will be all direct materials, if not stated as an essential part of the goods will not be counted in this section but will be taken as indirect raw materials and added to the production cost. Direct raw materials cost a large portion of the production cost budget.

- Direct Labor Direct Labor

It is the wage that the entrepreneur must pay to the employees who perform duties in the production of finished goods directly. However, all factory labor is not directly paid because the labor cost of the production process but not the direct production of the product is classified as indirect wages and is one of the production costs.

- Overhead production costs

It is an expense in the production of finished goods. In addition to direct raw materials and direct labor costs in this section, it will consist of indirect raw materials indirect labor factory utilities Repair and maintenance costs, etc.

The preparation of production cost statements is therefore important in calculating profit and loss in the sales of finished goods. Therefore, it must be prepared before making the profit and loss statement. and the Company's statement of financial position Business operators selling business must be prepared at the end of the accounting period.

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