10 Questions
What is the formula to calculate the Total Monthly Wage of workers?
(Daily wage)x(# of Days per month)x(# of workers)
What is the formula to calculate the Direct Labor Cost per batch?
(Hours spent per batch) x (Hourly Rate of Labor)
How is the Hourly Rate of Labor calculated?
Annual Wage / Annual Work Hours
What is the Monthly Indirect Costs formula?
Total Costs of all overhead expenses
How is the Indirect Cost per product calculated?
Monthly Indirect Costs / Monthly Production Target
What is the purpose of costing in a business?
To identify the direct and indirect costs incurred in producing a product
What is direct cost, according to the text?
Payment for the raw materials needed for production
What is an example of indirect cost in the production of a Cheesy Egg Sandwich?
The cost of overhead expenses such as rent and utilities
How much do workers receive in wages per day, according to the text?
₱250 per day
What is the purpose of surveying for high-quality but cheaper material suppliers?
To reduce the cost of production
Study Notes
Calculating Labor Costs
- Total Monthly Wage = (Daily wage) x (# of Days per month) x (# of workers)
- Annual Wage = (Total Monthly Wage) x (12 Months)
- Annual Work Hours = (Hours/Day) x (Days/Week) x (47 Weeks) = (Hours/Week) x (47 Weeks) = (Hours/Year) x (# of workers)
- Hourly Rate of Labor = Annual Wage / Annual Work Hours
- Hours Spent per Batch = (Labor Time) x (# of workers)
- Direct Labor Cost = (Hours spent per batch) x (Hourly Rate of Labor)
Indirect Costs
- Indirect Costs are overhead expenses like rent, bills, loans
- Monthly Indirect Costs = Total Costs of all overhead expenses
- Monthly Production Target = (# of products per day) x (days of operation)
- Indirect Cost per Product = Monthly Indirect Costs / Monthly Production Target
Determining Costing of Products and Services
- Costing is the amount spent to produce a product or service before it can be sold
- Pricing is the amount the product or service is sold to the market, based on supply and demand
- Costing includes Direct Cost, Material Cost, Staff Cost, and Indirect Cost
Direct Cost
- Direct Cost is the payment for raw materials needed for production
- Material Cost is the cost of all raw materials needed for manufacturing and functioning of a product
- Staff Cost is the cost wages or salaries of all workers concerned in the manufacturing and functioning of the product
Calculating Direct Labor Cost
- Total Monthly Wage = (Daily wage) x (# of Days per month) x (# of workers)
- Annual Wage = (Total Monthly Wage) x (12 Months)
- Annual Work Hours = (Hours/Day) x (Days/Week) x (47 Weeks) = (Hours/Week) x (47 Weeks) = (Hours/Year) x (# of workers)
- Hourly Rate of Labor = Annual Wage / Annual Work Hours
- Hours Spent per Batch = (Labor Time) x (# of workers)
- Direct Labor Cost = (Hours spent per batch) x (Hourly Rate of Labor)
This quiz covers the concepts of costing and pricing in business, including direct and indirect costs, material costs, staff costs, and overhead expenses. It also involves listing needed materials, manufacturing materials, manpower, and facilities for a product, such as a cheesy egg sandwich. Test your knowledge of costing and pricing principles in this quiz.
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