Costing essentials
What a product really costs: classifying and coding costs, valuing inventory, labour, overheads, break-even and budgets.
Cost classification
The ways a business sorts its costs: by what they are, by whether they can be traced to a product, by how they behave, and by who is responsible.
Coding costs and income
A cost code says which part of the business a cost belongs to and what kind of cost it is. Build codes, apply them and check them.
Inventory valuation
Prices change, so the same goods can be given more than one value. Work through FIFO and weighted average cost, and keep an inventory record card.
Labour costs
How production workers are paid and what that does to the cost of the product: time rate, overtime, piecework, bonuses and labour cost per unit.
Overheads
Rent, heating and salaries belong to no single product. Share them between departments, then charge them to each job by the hour.
Marginal costing
Split costs into fixed and variable, and one figure does most of the work: contribution. Use it to find break-even, safety and target sales.
Budgets and variances
A budget is the plan. A variance is where the month went differently. Build a budget, flex it, and report the differences that matter.