1. Product Costing
= determining the cost associated with a product
-Reasons for product costing
-Variable, fixed and mixed
HL: 2007, 2003

2. Product Costing
1. Product = anything that is manufactured for sale (e.g. iPhone)
2. Product Costing = determining the cost associated with a
product
iPhone 5
Materials =
Manufacturing Cost =

3. Product Costing
iPhone 5
Materials = $199 = €155
Manufacturing Cost = $8 = €6
Total = $207 = €161

6. Product Costing
3. Manufacturing Costs incurred:
+Direct Labour
+Direct Expenses
= Prime Cost (= direct cost excl. fixed costs)
+ Variable Factory Overheads
+ Fixed Factory Overheads
= Factory or Manufacturing or Production Cost

7. Product Costing
4. Reasons for Product Costing:
(i) Fixing Selling Price (note: Selling Price = Cost Price + Profit)
(ii) Control = comparing budgeted costs with actual
(iii) Stock Valuation = to complete trading and profit and loss
accounts

8. Product Costing
5. Variable Vs Fixed Vs Mixed
For Example:
(i) Direct Materials
(ii) Direct Wages
(iii) Overheads
(iv) Administration Expenses