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Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost, direct labor cost and manufacturing overhead. [1] It is a factor in total delivery cost. [2]
Factory overhead, also called manufacturing overhead, manufacturing overhead costs (MOH cost), work overhead, or factory burden in American English, is the total cost involved in operating all production facilities of a manufacturing business that cannot be traced directly to a product. [1] It generally applies to indirect labor and indirect cost.
For example, the cost to develop a factory and obtain the initial capital required for manufacturing can be seen as a structural barrier to entry. A strategic barrier to entry is a cost incurred by new entrants that is artificially created or enhanced by existing firms. [ 4 ]
Process costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. [1] Costs are assigned to products, usually in a large batch, which might include an entire month's production. Eventually, costs have to be allocated to individual units of product. It assigns average ...
Overhead expenses are all costs on the income statement except for direct labor, direct materials, and direct expenses. Overhead expenses include accounting fees, advertising, insurance, interest, legal fees, labor burden, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities. [3]
Production costs directly affect a firm's profitability. In order to maximise profits, firms identify the cost minimising output level for a firm where marginal cost equals marginal revenue. The most common types of costs that are factored into this decision include: [89] Fixed costs; Variable costs; Marginal cost; Average total cost; Sunk costs
A value chain is a progression of activities that a business or firm performs in order to deliver goods and services of value to an end customer.The concept comes from the field of business management and was first described by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.
Variable costs are sometimes called unit-level costs as they vary with the number of units produced. Direct labor and overhead are often called conversion cost, [3] while direct material and direct labor are often referred to as prime cost. [3] In marketing, it is necessary to know how costs divide between variable and fixed. This distinction ...