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Basics of Manufacturing Costs 140

This class describes the basic costs associated with manufacturing and how these costs are typically controlled.

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Class Details

Class Name:
Basics of Manufacturing Costs 140
Version:
1.0
Difficulty:
Beginner
Number of Lessons:
17
Additional Language:
Spanish

Class Outline

  • Objectives
  • What Are Costs?
  • Direct and Indirect Costs
  • Direct Labor and Materials
  • Factory Burden
  • Tooling Costs
  • Product Engineering Costs
  • General and Administrative Costs
  • Sales and Marketing Cost
  • Costs and Product Volume
  • Fixed Costs
  • Variable Costs
  • Semi-Variable Costs
  • Step-Variable Costs
  • The Value of Learning
  • The Benefits of Cost Analysis
  • Summary

Objectives

  • Define costs.
  • Distinguish between direct and indirect costs.
  • Define direct labor and direct materials.
  • Define factory burden.
  • Describe tooling costs.
  • Define product engineering costs.
  • Identify general and administrative costs.
  • Define sales and marketing costs.
  • List the types of costs in relation to product volumes.
  • Identify fixed costs.
  • Identify variable costs.
  • Identify semi-variable costs.
  • Define step-variable costs.
  • Describe the benefits learning can have on costs.
  • Describe the benefits of cost analysis.

Job Roles

Certifications

MSSC
  • MSSC Manufacturing Processes and Production

Glossary

Vocabulary Term Definition
amortization The process of spreading costs over time to reduce their impact.
commission A payment given to salespeople based on the amount of a product sold.
cost The amount of time, money, and labor spent to create a product or perform a service. Costs are typically expressed as a dollar amount.
cost estimate Any attempt by a company to calculate the price of producing a product before making it.
direct cost Any cost that can be specifically attributed to the creation of a final product. Direct costs include direct labor and direct material.
direct labor The wages of the people that actually manufacture a specific product. Direct labor is a direct cost and includes only those people who are directly making the product.
direct material The raw materials used in the creation of the final product. Direct material is a direct cost and includes any raw material that ends up as a part of the final product.
factory burden The cost of running a factory. Factory burden involves indirect labor, indirect materials, and fixed or miscellaneous expenses.
fixed cost Costs that do not change based on the product volume.
general and administrative cost The cost of keeping a company running. General and administrative costs are indirect costs and exclude the costs incurred from factory processes central to the creation of a product.
indirect cost Any cost that cannot be traced directly to the making of the final product, but is still necessary for the company to run.
indirect labor The wages of anyone who does not directly contribute to manufacturing a product, but who are still needed to run the factory.
indirect material Any material that is not part of the finished product or used to make the product. Cleaning products are an indirect material cost.
prime cost Direct labor and direct materials combined into one cost.
product engineering cost The cost in time and money to design, build, and test prototypes and final designs of a product. Product engineering cost is usually viewed as an indirect cost.
product volume The number of products being made and sold.
prototype An early model used to complete design evaluation.
selling cost The total cost of marketing, advertising, and selling a product.
semi-variable cost Costs that have a fixed component and a variable component. Both components should be factored into a cost analysis.
step-variable cost Costs that remain fixed for certain amounts of products, but then jump drastically at other amounts. Step-variable costs are named for how they appear when graphed.
tooling cost The cost to buy or build new tools or to revise older tools to make a specific product. This can be a direct or indirect cost, though most companies view it as indirect.
variable cost Costs that change in relation to the product volume. Variable costs may follow a variety of patterns.