Manufacturing vs Non-Manufacturing Costs Overview Manufacturing Cost Analysis 2

Importance Your company wants to make money! Profit and price (and ultimately your salary) depend on how you manage manufacturing costs. You will have to address costs and economics in presentations about your work Manufacturing Cost Analysis 2

Overview Non-Manufacturing Costs Manufacturing Costs Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Management salaries and office supplies Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Management salaries and office supplies Shipping the completed product to the customer Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Management salaries and office supplies Shipping the completed product to the customer Janitorial, maintenance, taxes, and depreciation of non- manufacturing facilities Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Management salaries and office supplies Shipping the completed product to the customer Janitorial, maintenance, taxes, and depreciation of non- manufacturing facilities Research and development Manufacturing Cost Analysis 2

Non-Manufacturing Costs Definition: Costs for company operations that are not directly related to manufacturing. Examples: Sales and marketing supplies and salaries Management salaries and office supplies Shipping the completed product to the customer Janitorial, maintenance, taxes, and depreciation of non-manufacturing facilities Research and development Interest on Loans Manufacturing Cost Analysis 2

Manufacturing Costs Definition: Costs from labor and materials that are directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Manufacturing Cost Analysis 2

Manufacturing Costs Examples: Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Manufacturing Cost Analysis 2

Manufacturing Costs Examples: Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Maintenance of machines Depreciation of property and equipment values Manufacturing Cost Analysis 2

Manufacturing Costs Examples: Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Maintenance of machines Depreciation of property and equipment values Raw material costs Manufacturing Cost Analysis 2

Manufacturing Costs Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Maintenance of machines Depreciation of property and equipment values Raw material costs Manufacturing labor costs Manufacturing Cost Analysis 2

Manufacturing Costs Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Maintenance of machines Depreciation of property and equipment values Raw material costs Manufacturing labor costs Utility costs of production facility (i.e. not for research, corporate, or other facilities) Manufacturing Cost Analysis 2

Manufacturing Costs Definition: Costs from labor and materials that is directly or indirectly related to producing an item. These costs should be clearly linked to the factory where the product is manufactured. Examples: Property taxes and rent paid for the manufacturing facilities Maintenance of machines Depreciation of property and equipment values Raw material costs Manufacturing labor costs Utility costs of production facility (i.e. not for research, corporate, or other facilities) Production waste disposal costs Manufacturing Cost Analysis 2

Homework Problem (MC 2) For the following items, classify each as either a Manufacturing Cost or a Non-manufacturing Cost. Then state why you chose to classify the item as you did. A) The electric bill for Ford’s corporate office B) The salary of a call-center employee handling returns C) The cost of wood used to build IKEA furniture D) The cost of new computers for a pharmaceutical company’s research team E) The salary of the janitorial / maintenance staff at a manufacturing plant Manufacturing Cost Analysis 2

Sources: Non-Manufacturing Costs: Manufacturing Costs: Images: http://www.microbuspub.com/pdfs/chapter4.pdf http://www.accountingcoach.com/nonmanufacturing-overhead/explanation http://simplestudies.com/manufacturing-nonmanufacturing-costs.html/page/3 Manufacturing Costs: http://www.accountingcoach.com/manufacturing-overhead/explanation http://simplestudies.com/manufacturing-nonmanufacturing-costs.html Images: http://www.freeimages.com Manufacturing Cost Analysis 2