Understanding Costs and Pricing for Your Business Training

This training session covers various aspects of cost identification, calculation, and pricing for businesses. Learn about different types of costs, how to calculate the cost of goods or services, pricing strategies, and classification of costs. Engage in group discussions, explore cost data, and understand the costing process for retail or wholesale businesses.

• Business Training
• Cost Identification
• Pricing Strategies
• Group Discussion
• Retail Business

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Uploaded on Sep 11, 2024 | 0 Views

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1. 1

2. Objectives After this training, you will be able to: Identify the different types of cost of running a business Calculate the cost of your goods or services using your business records

3. Content Know your costs Costing of goods or services Costing for retailers and wholesalers Costing for single product businesses Costing for multiple product businesses

4. Discuss in the following two questions with the other members of your group and write your answers on a flip chart: How do members of your group arrive at the price of their goods or services Are the prices appropriate? Why? Group Discussion

5. Pricing Goods or Services The competitor s prices Our price

6. Costs In Business Electricity/ water/ telephone Equipment Wages Property rental Transportation Interest Costs of running a business Materials Etc.

7. Different Types of Costs Non- Production Costs Production Costs Overhead Expenses Material Costs Labour Costs

8. Based on the three categories, discuss how to classify each of the cost cards with the other members of your group. Classification of Costs

9. Part II COSTING OF GOODS OR SERVICES Objective: To calculate the cost of your goods or services

10. Part II.1 COSTING FOR RETAIL OR WHOLESALE BUSINESSES

12. Get Cost Data THE BASIC RECORD BOOK Cash Bank VAT Voucher No. Materia l Cost Labour Cost Overhead expense Date Details Sales BALANC E BALANC E OUTBALANC IN OUT IN OUT IN E Total

13. Calculating Costs Calculate the Material Cost per item 1 Calculate the Overhead Expense per item 2 Add up all costs to get the total cost 3

14. Step 1: Calculate the Material Cost Per Item

15. Step 2: Calculate the Overhead Expense Per Item Overhead Expense per month Overhead Charge Total Material Cost per month Overhead Expense per item Material Cost per item Overhead Charge

16. Step 3: Total Cost Per Item Material Cost per item Overhead Expense per item TOTAL COST PER ITEM

17. Costing at Sibanda General Store Work with the other members of your group Calculate the cost of a carton of milk using the information provided One group will be chosen to describe how the cost should be calculated The other participants offer their comments

18. II.2 COSTING FOR A SINGLE PRODUCT MANUFACTURER OR SERVICE OPERATOR

19. PRODUCT COSTING FORM (for single product manufacturers and service operators) Product: 1. TOTAL COST PER MONTH Total Material Cost per month(1) Total Labour Cost per month (2) Total Overhead Expense per month (3) Total Cost per item (4) = (1) + (2) + (3) 2. NUMBER OF ITEMS PRODUCED PER MONTH Number of items produced per month (5) 5. TOTAL COST PER ITEM (6) = (4) /(5)

20. Get Cost Data BASIC RECORD BOOK Cash Bank VAT Voucher No. Material Costs Labour Costs Overhead Expenses Date Details Sales IN OUT BALANCE IN OUT BALANCE IN OUT BALANCE Total 1,200 280 540 310

21. Calculating Costs Calculate the total cost per month 1 Calculate the number of items produced per month 2 Calculate the total cost per item 3

22. Step 1: Calculate the Total Cost Per Month Material Costs Labour Costs Overhead Expenses TOTAL COST

23. Step 2: Calculate the Number Of Items Produced Per Month Sales volume per month Number of items produced per month Unit price

24. Step 3: Calculate the Total Cost Per Item Total cost per month Total cost per item Number of items produced per month

25. Costing at Comfort Chairs Work with the other members of your group Calculate the cost of one chair using the information provided One group will be chosen to describe how the cost should be calculated The other participants will then offer their comments

26. II.3 COSTING FOR A MULTIPLE PRODUCT MANUFACTURER OR SERVICE OPERATOR

27. Classification of Costs Non- Production Costs Production Costs Overhead Expenses Material Costs Labour Costs Direct Material Costs Indirect Manufacturing Expenses Direct Labour Costs

28. PRODUCT COSTING FORM (For multiple product manufacturers and service operators) Product: 1. DIRECT MATERIAL COST PER ITEM Total Direct Material Cost per month(1) Number of items produced per month (2) Direct Material Cost per item (3) = (1)/(2) 2. DIRECT LABOUR COST PER ITEM Total Direct Labour Cost per month(4) Number of items produced per month (2) Product Costing Form Direct Labour Cost per item (5) = (4)/(2) 3. INDIRECT MANUFACTURING EXPENSE PER ITEM Total Indirect Manufacturing Expense per month (6) Total direct cost of the entire business per month (7) Indirect Manufacturing Expense per direct cost (8) = (6)/(7) Total direct cost per item (9) = (3) + (5) Indirect Manufacturing Expense per item (10) = (8) x (9) 4. OVERHEAD EXPENSE PER ITEM Monthly Overhead Expense (11) Overhead Expense per direct cost (12) = (11)/(7) Total direct cost per item (9) Overhead Expense per item (13) = (12) x (9) 5. TOTAL COST PER ITEM (14) = (13) + (10) + (5) + (3)

29. Get Cost Data DETAILED COST RECORD Date Details Direct Material Costs Direct Labour Costs Indirect Manufacturing Expenses Overhead Expenses Voucher No. A B C A B C TOTAL

30. Calculating Costs Calculate the Direct Material Cost per item 1 Calculate the Direct Labour Cost per item 2 Calculate the Indirect Manufacturing Expense per item 3 Calculate the Overhead Expense per item 4 Add up all the costs to get the total cost per item 5

31. Step 1: Calculate the Direct Material Cost Per Item Total Direct Material Cost per month Direct Material Cost per item Number of items produced per month

32. Step 2: Calculate Direct Labour Cost Per Item Total Direct Labour Cost per month Direct Labour Cost per item Number of items produced per month

33. Step 3: Calculate the Indirect Manufacturing Expense Per Item Indirect Manufacturing Expense per month Indirect Manufacturing Expense Charge Total direct cost of the entire business per month Indirect Manufacturing Expense per item Indirect Manufacturing Expense Charge Total direct cost per item

34. Step 4: Calculate the Overhead Expense Per Item Overhead Expense per month Overhead Charge Total direct cost of the entire business per month Overhead Expense per item Total direct cost per item Overhead Charge

35. Step 5: Total Cost Per Item Indirect Manufact uring Expense per item Direct Material Cost per item Direct Labour Cost per item Overhead Expense per item TOTAL COST PER ITEM

36. Costing at Reliable Tailors Work with the other members of your group Calculate the cost of one pair of overalls, using the information provided One group will be chosen to describe how the cost should be calculated The other participants will offer their comments