5 Efficient Ways to Calculate the Cost of Production for Manufacturing Companies

What is the efficiency of calculating the cost of goods manufactured for a manufacturing company? You can find out how in this article! Every company certainly wants to make a profit, as well as manufacturing companies. In order to be able to benefit, the company must be able to calculate its cost of production.

As is known, the profit from the sale of goods or services produced comes from the selling price minus the cost of production. The cost of production must, of course, be lower than the selling price. In addition, the production price must be suppressed so as not to be too high because it will cause the selling price to also be high following the production price. In order not to miscalculate, consider some efficient ways to calculate the cost of goods manufactured for manufacturing companies below!

Determine the cost of the raw materials.

The first thing to calculate is the cost of raw materials. This one material is purchased and used to make the final product. The more raw goods, the more the company has to pay. The increase in the price of raw materials also makes the selling price expensive. In addition, the cost of raw materials includes the price of materials, transportation costs, storage costs, and so on.

First, direct raw materials, namely raw materials that can be directly traced to the final product produced, are classified into two types. For example, the raw material for wood products in furniture and steel in car products.

Second, raw materials are indirectly This one material is used to produce the final product but cannot be easily identified and allocated to cost centers. This one ingredient is also not part of the finished product. To calculate the cost of raw materials, you can calculate it with the formula:

COGS = beginning balance of raw materials + purchases of raw materials -ending balance of raw materials.

Determine the Production Cost

Next, calculate the cost of production. Included in this cost are costs that arise during the company's production process. These costs are the difference between a manufacturing company and a trading company. A manufacturing company's production costs are made up of three components: direct materials, indirect materials, and finished goods products to be produced and sold.Second, the direct labor involved with the product manufacturing process, namely the processing of raw materials to completion, Furthermore, factory overhead costs that can arise due to the production process of making finished goods.

How to Determine the Cost of Production or HPP

The efficient way to calculate the cost of goods manufactured for the next manufacturing company is to determine the cost of goods manufactured, or HPP. Usually, the way to calculate the HPP price is by the total cost of production + the beginning balance of the inventory – the ending balance of the inventory.

The Fourth Method of Calculating Cost of Goods Sold (COGS)

Next, calculate the cost of goods sold, or HPP. How to calculate HPP by adding up the cost of goods manufactured with the initial inventory after it is reduced by the ending inventory. The formulation of the formula is as follows:

COGS = Cost of Goods Manufactured + Beginning Goods Inventory - Ending Goods Inventory

Count automatically counts

Of course, it would be very fatal if there was a calculation error. These errors can be caused by human error and inaccurate data sources. To avoid calculation errors, it's a good idea to use accounting software that can calculate automatically. With this software, you can perform calculations quickly, precisely, and easily. With just a few clicks, you can calculate HPP accurately.

Want to calculate HPP easily? You can use the services of Soltius. This IT solution provider company provides a variety of solutions tailored to your business needs. Soltius is the largest and most credible IT solutions company in Indonesia. The SOLTIUS solution is an efficient way to calculate the cost of production for the right manufacturing company. Please click this link to get to know SOLTIUS Accounting Software in more detail.

Detail information : https://www.soltius.co.id/id/blog/mengenal-software-akuntansi-dan-manfaatnya