The Effect of Production Cost and Sales Costs in PT.

Krakatau Steel
Tbk in 2010-2019 on a quarterly basis

Shilvi Maljetia , Elsa Thyovanib , ͨ Nahruddien Akbar, ͩ Dian Hakip Nurdiansyah, S.E.,
M.M

a
Faculty of Economic, Universitas Singaperbangsa , Karawang, Indonesia; b Faculty
of Economic, Universitas Singaperbangsa , Karawang, Indonesia; ͨ Universitas
Singaperbangsa , Karawang, Indonesia; ͩ Universitas Singaperbangsa , Karawang,
Indonesia.

a
Shilvi Maljeti
1810631030064@student.unsika.ac.id
Student in Universitas Singaperbangsa Karawang

b
Elsa Thyovani
1810631030177@student.unsika.ac.id
Student in Universitas Singaperbangsa Karawang

ͨ Nahruddien Akbar M
nahruddien.akbar@feb.unsika.ac.id
Lecturer in Universitas Singaperbangsa Karawang

ͩ Dian Hakip Nurdiansyah, SE., MM.

dian.hakipnurdiansyah@staff.unsika.ac.id
Lecturer in Universitas Singaperbangsa Karawang
The Effect of Production Cost and Sales Costs in PT. Krakatau Steel
Tbk in 2010-2019 on a quarterly basis

ABSTRACT

In manufacturing companies, production costs and sales costs are cost

components that are always there in processing goods from raw goods to
goods to consumers. From there we can see how production costs and
selling costs are components that affect the profit the company will receive,
therefore In this research, we will see how the effect of production costs and
sales costs on profits obtained at PT Krakatau Steel as the number one
manufacturing company that produces steel, the data used in this study uses
data from 2010 to 2019 on a quarterly basis. By using secondary data
obtained from the official website of PT Krakatau Steel, the calculations are
carried out using quantitative methods, using the SPSS 26 and Excel 2010
application, the results show that production costs and sales costs together
have an effect on profit given that production costs are greater than sales
costs, sales costs and production costs have an effect of 44% while the rest
is the influence of other variables that are not calculated in this study.

Keywords: Production Cost, Sales Cost, and Net Profit.

Chapter 1: Introduction
1.1 Background

In general, companies have targets or goals to be achieved. One of these goals is to

get a high profit by minimizing the costs that occur in the production process.

Profit or loss is often used as a measure to assess company performance. The

elements that form part of profit are income and expenses. Cost is an important

source of information in a company's strategic analysis. Basically, the problem

that often arises is that planning costs are not in accordance with what actually

happened (cost realization). Therefore, to achieve efficient production, it is

necessary to control the production costs that will be incurred. Reducing

 production costs is an important cost control to do so that there is no waste, by

still paying attention to the quality of the products produced. Thus, it can increase

customer satisfaction and can maintain market share in the long run. The

company's ability to determine production costs will affect the level of profit

earned. Costs that are directly related to the processing of raw materials into

products that are ready for sale are often referred to as production costs. According

to the object of expenditure, production costs are broadly divided into raw

material costs, labor costs, and factory overhead costs. So, the net profit of a

product is strongly influenced by the cost of production which means that there is

a relationship between production costs and net income, that is, production costs

are a factor that determines the high or low net income that will be generated.

Selling costs are characterized by capturing market share and getting customers to

acquire orders and fulfill orders. Because sales costs include marketing activities,

such as advertising costs, promotional costs and others, which can increase sales

volume, advertising and promotion will play a very important role in determining

profit. With large sales costs, it is also expected that promotional activities will be

wider in reaching consumers and can achieve a larger number of requests as well,

the volume of sales is influenced by promotional factors, while the size of the

promotional costs depends on the marketing party who does it. Certainly the

company wants to always increase the number of sales to get a bigger profit.

Promotion is expected to increase sales volume. With an increase in sales, the

profit to be obtained will also increase.

 PT. Krakatau Steel, Tbk. is the largest steel producer in Indonesia and produces

various steel products, This company produces various steel products such as hot

and cold rolled coils as well as wire rods to earn revenue.

1.2 Formulation of Problem

In accordance with the identification of the problems stated above, the authors try to
formulating the problems to be discussed in this study are as follows:
1. How the effect of production costs to net profit in PT. Gudang Garam, Tbk?
2. How the effect of selling cost to net profit in PT. Gudang Garam Tbk?
3. How the impact of production cost and sales cost to net profit in PT. Gudang
Garam Tbk?
1.3 Hypothesis
The research objective is related to the written problem formulation. The research
objectives this is to analyze and measure:
1. The production costs affect to net profit of PT. Gudang Garam Tbk.

2. The sales costs affect to the net profit of PT. Gudang Garam Tbk.

3. The production costs and selling costs simultaneously affect to PT. Gudang
Garam Tbk net profit.

Chapter 2 : Literature Review

2.1 Production Cost

Costs (cost) are expenses or value of sacrifice to obtain goods or services that are

useful for the future, or have benefits beyond one accounting period. According

to Mulyadi, in a broad sense, costs are the sacrifices of economic resources, which

are measured in units of money, which have occurred or are likely to occur for

certain purposes. Meanwhile, in a narrow sense, the cost can be interpreted as a

sacrifice of economic resources to acquire assets.

Production is the activity of a company to process and convert raw materials into

finished goods through the use of labor and other production facilities. Costs

incurred in connection with these production activities are called production costs.

So it can be said that the cost of production is the cost that comes from the supply

of raw materials to the costs incurred to produce raw materials so that they become

finished goods that are ready for sale.

According to Bates and Parkinson, Production is an organized activity to convert

resources into finished products in the form of goods and services aimed at

meeting the demand for these transformed resources.According to Abdul Halim

(1988: 5), production cost is the accumulation of costs that are directly related to

the production process of an item and will be matched with income in the period

when the goods are sold.

Production cost will form the cost of goods manufactured which will be used to

calculate the cost of goods manufactured and the cost of goods at the end of the

accounting period. According to Charles T. Horngren, the elements of

production costs are as follows:

1. Direct Material Costs (Direct Material)

Materials directly used to produce a finished good that is ready to be marketed.

These raw materials include all materials that can be physically identified as

part of the finished product.

2. Direct Labor Costs

Workers convert raw materials directly into finished goods that are ready to be

marketed. Direct Labor are costs for all direct workers who are placed and

empowered to handle production activities directly.

 3. Factory Overhead (Factory Overhead)

Factory overhead is all manufacturing costs that are not traced directly to a

specific output.

2.2 Sales Cost

Sales costs (marketing) are costs required to market, serve and distribute goods and

services or often called the cost of getting orders (order getting cost) and the cost

of fulfilling orders (order filling cost). According to Mulyadi (2008: 202), "Sales

are activities carried out by sellers in selling goods or services in the hope that

they will earn a profit from these transactions and sales can be interpreted as a

transfer or transfer of ownership rights over goods or services from the seller to

buyer". So it can be concluded that selling is an actual effort or step taken to move

a product, whether in the form of goods or services, from producers to consumers

as the target.

Sales are generally divided into two, namely cash sales and credit sales (Basu Private,

2009: 10), as follows:

1) Cash Sales

Cash sales are the activities of exchanging goods which delivery between the two

parties, namely the seller and the buyer, is carried out at the time the sale is made

2) Credit Sales

Credit sales are the activity of exchanging goods where one party (the buyer)

hands over the money in the future or there is an average grace period of more

than one month from the time of delivery of the goods.

The main purpose of sales is to bring profit or profit from the product or goods

produced by the producer with good management. In practice, the seller itself
 cannot be done without the actors working in it, such as agents, traders and

marketing personnel

2.3 Net Profit

Commite On Terminology (Sofyan Syafri H., 2004) in Aliyal Azmi (2007: 12) defines

profit as the amount that comes from a reduction in the cost of production, other

costs and losses from income or operating income.

According to Stice, Stice, Skousen (2009: 240) profit is the taking on investment to

the owner. It measures the value that the entity can provide to investors and the

entity still has the same wealth as its original position.

According to Soemarso SR (2004: 227), the last figure in the income statement is net

income. This amount represents the net increase in capital. Conversely, if the

company suffers a loss, the last number in the income statement is the net

loss.Meanwhile, according to Smith Skousen (1989: 119) Net Profit is the

difference between the amount of income earned by a unit of business during a

certain period and the amount of costs that can be applied to the opinion.

The Net Profit Formula:

Net Profit = Total Revenue - Total Expenses

2.4 Framework
2.4.1 The effect of production costs of net profit

According to Mulyadi (2005: 11) states that production costs affect operating profits

are as follows: "The cost of production is an economic resource that is sacrificed

for produce output, the output value is expected to be greater than the sacrificed

input to produce these outputs so that organizational activities can generate profits

or residue company results". According to Mulyadi (2013; 121) in his book states
 "If production costs are reduced, it is possible what will happen is the level of net

income will increase. If the level of net income goes up, budget future costs will

also increase. "

2.4.2 The effect of sales cos of net profit

According to Budi Rahardjo (2016: 33) that: "There is a close relationship regarding

sales to an increase in the company's net profit, in this case it can be seen from the

company's profit and loss statement, because in this case the profit will arise if

product sales are greater than the cost. cost incurred. The main factor that affects

the size of the profit is income, income can be obtained from the sale of

merchandise.

According to Marwan (2013: 60), that "Sales is an integrated effort to develop

strategic plans aimed at satisfying the needs and desires of buyers, in order to get

sales that generate net profit".

Production Cost
Net Profit
(X1)
Sales Cost (Y)

(X2)
Framework 1.

Chapter 3: Research Methods and Materials

3.1. Population and Sample

The population used in this study is PT.Krakatau Steel, is the largest steel producer in

Indonesia and produces various steel products and the research period 2010-2019

with sample as many as 30. The research sample was taken by purposive

sampling, with the following criteria:

 1. PT. Krakatau Steel listed on the Indonesia Stock Exchange during the period
2010-2019.
2. Financial reports are available and published consistently during 2010-2019
and submitted through the official website of PT.Krakatau Steel.

3.2 Types of Data and Data Sources

The type of data used in this research is secondary data, data collection was carried

out based on company data that met the research criteria during the 2010-2019

period. Sources of data obtained in the study came from:

1) The data on financial statements published by PT.Krakatau in accordance with

the research sample and study period
2) The literature study by conducting literature reviews, reviewing various
literatures such as journals, previous research, and other sources related to this
research problem.
3) The data Collection Methods In this research, the data collection method is
the collection of secondary data taken from the official website of
PT.Krakatau.

The data processing in this study was carried out using the help of Microsoft Excel

2010 and SPSS version 19 to be able to process data and obtain results from the

variables studied, which consisted of independent variable , namely production

costs and sales costs, while the dependent variable is net income
4. Research and Discussion Results

 Multiple Linear Regression Analysis

Coefficientsa
Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta T Sig. Tolerance VIF
1(Constan -4902,970 77700,339 -,063 ,950
t)
PC ,111 ,035 ,906 3,155 ,004 ,251 3,977

SC -1,533 1,466 -,300 -1,045 ,305 ,251 3,977

a. Dependent Variable: P

Based on the data, the value of the regression is:

Y = -4902.97 + 0.111X1-1.53X2

The constant is -4902.97; means that if PC (X1) and SC (X2), the value is 0, then the

net profit value (Y) is - $ 4902.97

The PC variable regression coefficient (X1) is 0.11, meaning that if the PC has an

increase of 1%, the amount of Profit (Y) will increase by $ 0.11, assuming other

independent variables have a fixed value. The coefficient is positive, meaning that

there is a positive relationship between PC and profit, the higher the PC, the higher

the profit.

The PS variable regression coefficient (X2) is -1.533, meaning that if the PS has an

increase of 1%, the Y price will decrease by $ 1.533, assuming other independent

variables have a fixed value. The coefficient is negative, meaning that there is a

negative relationship between PS and profit, the higher the PS, the lower the

profit.
 Partial Test Based on Significance Value

Coefficientsa
Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1(Constant) -4902,970 77700,339 -,063 ,950
PC ,111 ,035 ,906 3,155 ,004 ,251 3,977

SC -1,533 1,466 -,300 -1,045 ,305 ,251 3,977

a. Dependent Variable: P

Based on the data calculation above the significance of PC is 0.004 less than 0.005,

which means that PC has an effect on profit (Y),then for significant SC, namely

0.305 greater than 0.005 SC has no effect on Profit (Y).

 Multiple Correlation Analysis Test (R)

Model Summaryb
Mode R Adjusted R Std. Error of Durbin-
l R Square Square the Estimate Watson
1 ,664a ,440 ,399 329711,857 1,603
a. Predictors: (Constant), SC, PC
b. Dependent Variable: P

This coefficient shows how much influence the relationship between independent

variables (X1, X2) and the dependent variable (Y). Based on the output, the R

number is 0.664, so because the correlation value is between 0.60-0.799, it can be

concluded that there is a strong relationship between PC and SC on profit (Y).

 Coefficient of Determination (𝑅 2 )

Model Summaryb
Adjusted R Std. Error of Durbin-
Model R R Square Square the Estimate Watson
1 ,664a ,440 ,399 329711,857 1,603
a. Predictors: (Constant), SC, PC
b. Dependent Variable: P
 Based on the output, it is obtained 𝑅 2 (R Square) of 0.440 or (44%). This shows that

the percentage of the contribution of the influence of the independent variables

(PC and SC) to the dependent variable (profit) is 44%, while the other 66% is

influenced by other variables that are not in this research model.

 Mutual Regression Coefficient Test (F test)

ANOVAa
Sum of Mean
Model Squares Df Square F Sig.
1 Regression 2308886127 2 1154443063 10,619 ,000b
667,600 833,800
Residual 2935167533 27 1087099086
017,866 30,291
Total 5244053660 29
685,466
a. Dependent Variable: P
b. Predictors: (Constant), SC, PC

Based on the results of the calculation of the F test on spss and excel, it was found

that (F count 10.619> Ftable 3.3541) with a significance level of 0.000 <0.005

So the conclusion is that H3 is accepted because f count is greater than f table,

meaning that PC and SC together have an influence on profit.

Chapter 5: Conclution

From the analysis and calculations that have been carried out, it can be concluded that

the production costs and selling costs affect the profit obtained by PT Krakatau

Steel, but the effect of the production costs as X1 is greater than that given by the

selling costs. Together, the production costs and sales costs at PT Krakatau Steel
have an effect of 44% on the profit earned by the company while the rest is

influenced by other variables.

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