ASSIGNMENT

Topic : Explain with the examples following:

1. Manufacturing Cost
2. Non-Manufacturing Cost
3. Elements of Manufacturing Cost
Manufacturing Cost
Manufacturing cost is the cumulative total of resources that are
directly used in the process of making various goods and products. In
some formulas, the cost of manufacturing includes the expenses
associated with the purchase of raw materials. At other times, the
cost for raw materials is excluded. In general, factors such as labor,
equipment operation, and the general overhead for maintaining the
production facility are common components that are included in
determining the overall manufacturing costs.
Since the goal of most production companies is to earn a profit by
selling goods manufactured and sold by the company, paying close
attention to the overall manufacturing cost is extremely important.
By monitoring the various elements that make up the cost for
manufacturing, it is possible to ensure that available resources are
being used to best advantage, and thus earning the highest amount
of return on each unit that is sold at the current price.

Examples of manufacturing cost:

 Salaries and wages for quality assurance, industrial engineering,
materials handling, factory management.
 Equipment repair parts and supplies.
 Factory utilities.
 Depreciation on factory assets

Non-Manufacturing Cost

Non-manufacturing overheads in an manufacturing business. These

are not include in the production cost of goods for inventory
valuation purposes. An appropriate portion of these overhead is
someone included on the cost card so that an appropriate price can
be set Non-manufacturing costs refer to those incurred outside the
factory or production department. These are costs are not needed in
transforming materials into finished goods. Non-manufacturing costs
include: selling expenses and general expenses.
Example Of Non-Manufacturing Cost:
 Advertising
 Administrative office rent
 Salary of factory workers
 Depreciation of factory building
 Depreciation of office equipment

Elements Of Manufacturing Cost :

There are three basic elements of manufacturing costs which are:

 Material costs: Material Cost as its name implies is the cost

of materials that are required and necessary in order to
manufacture a product or produce goods. The cost of
material covers two types of costs: direct materials cost such
as the cost of Timber used to construct a house, the cost of
Steel which is used in the manufacturing of an automobile,
and the cost of the fabric which is used in the manufacturing
of clothes. Indirect material cost refers to such costs as the
cost of Rags, grease, and thread.
 Labor Cost: It is the sum and combination of the wages that
have to be paid to the workers in order to manufacture the
product. There are two types of labor cost: Variable labor
which is based on the amount of production output and
Fixed labor: which remains fixed and the same regardless of
the company’s production output.
 Manufacturing Overhead Cost: manufacturing overhead
cost is the cost of manufacturing a product. This includes the
cost of production salaries, facility rent, repair and
maintenance costs, the Cleaning costs of equipment and
Electricity and lightning…