Costing and Control of Factory Homework Answers
We can see how manufacturing companies are emerging with latest technology inventions, automated machines, and continuous power of monitoring. On the contrary, achieving the peak of sales and profit number is not a piece of cake for every factory due to the rise of competitors and pricing difference.
Product price has to come down for getting the sales graph up. In the majority of the cases, the lower your selling price is the higher number of the product you can sell. Of course, the product quality, guarantee period and the brand matters to customers. But, at first,let us have a glance what is important in price. Costing and control of factory homework answers demonstrate how manufacturing firms manage to lower the cost of the product. In other words, we will discuss here the tactics companies use to control the cost of the product in their manufacturing unit.
It is essential to get the prior understanding of how cost is calculated in different areas of a production company. In addition, it is also best to know how to control the cost in an efficient manner.
In factories, the cost is divided into three categories.
- Material – the raw material used in production in factories
- Labour– Workforce required to get the production order completed
- Overhead – Extra operation coat running during the time of manufacturing process
All the three areas are interrelated, and they have an impact on each other. Financial experts control the price of the product by minimizing the cost in each sector listed above.
Monitor the cost in material section
The raw material is the base of any product which can give the rough estimation of the price.
Costing and control of factory homework answers give the real life example for better understanding of the topic.
Factory ABC manufactures chocolates and outsources the production of wrappers. If one wrapper costs around 0.30 Euro and the chocolate syrup cost 0.50 Euro, then the company cannot sell one chocolate less than a Euro.
Other expenses sit on the top of the raw material price as the raw material is the base.
Tactics used by factories for cost control on the material level:
- Negotiate the price of the wrapper with the outsourcing company.
- Arrange a market survey for all the businesses that can offer wrappers at desired price.
- Find the base price of the wrapper and calculate the cost of manufacturing it at home company.
- Companies tend to bind the raw material supplier in the contract for a year or so when the best price is given.
- Production business even negotiates with payment terms so they can get far ahead in generating profit and then paying afterward.
All the points listed above by costing and control of factory homework answers describe the methods used by factories for cost control purpose.
Techniques of cost control for labor
Human resources can help to monitor the cost of the factory in various ways.
- Manufacturing firms tend to hire employees on contract basis for the individual project. By adopting contract methods, companies can eliminate the risk of taking employee after the project is completed.
- In some cases, manufacturing companies outsource the work to interns. In this way intern students can get real life working experience, and it is beneficial for the enterprise as well.
- Costing and control of factory homework answers can demonstrate about the cost of labor Company ABC wants to do market research about getting the best price per wrapper. So, company ABC posts an advert on an online forum where the intern students are looking for work and working experience in the manufacturing firm.
- The factories also hire workforce by own rather than going for hiring company and pay them the extra amount.
- Manufacturing companies give jobs on a short-term basis; sometimes they pay even a daily labor charge and get the worker for only a day. That way if the worker is not efficient, they can get someone new.
Cost management for overhead
Overhead cost can minimize the overall product price if managed efficiently. In production factory, experts come up with various ideas to loosen up the burden of high sale prices. Cost saved on the overhead goes directly to the bottom line.
- Going green with environment and saving money for company
Factory management nowadays does not print everything on paper but, rather they take data on the handy device which can be accessed from anywhere anytime.
For example, if there are 100 pages printed in a daily report around the firm, it can save about 24,000 pages a year and stationary expense related to paper. Such as staples, pins, rubber bands, pens, etc.
Communication through phone can be expensive for manufacturing enterprises. They often tend to use the open source and free softwares like Skype to minimize the cost.
- Save the cost of company with saving electricity
Manufacturing companies tend to use as much less electricity as they can. Using the temperature the right way can help in controlling the cost of factory.
For example, company ABC is located on the 8th floor which is having large windows. Large windows have large curtains which are taken off after the summer time for daylight. Using this way, manufacturing companies save the overhead cost of electricity.
- Waste management for perfection and improvement of product cost
Production factories use the waste management technique to minimize the loss as little as possible because waste is additional overhead which gives no benefits at all. Companies increase the monitoring so that waste can be reduced and cost can be streamlined says costing and control of factory homework answers.
Apart from all, factories sometimes push employees to work more hours for the same wages and even deduct the amount from salary for the waste which may be unhealthy for the relationship between the company and employees. Production department comes up with various tactics for optimizing the price of each product in the process with minimum loss and maximum perfection. Costing and control of factory homework answers comprehend the costing points in the simplest way possible so that anyone can adapt that in life with practical way.