Production Costs

• Total costs: all the costs incurred by the business. (raw materials, marketing, production of goods and services)
• Fixed Costs: do not vary according to the number of units produced, Fixed costs are calculated over a week of month.
• Primary costs: direct cost of raw material, parts that go into producing products.
• Fixed overhead expenses: cost payable every week or moth, no vary according to the number of products produced.

  e.g factory rent, utilities, production/supervisory salaries, depreciation on production equipment, insurance, vehicle installments
• Variable overheard expenses: determined by the number of units produced, vary according to how many goods are produced in a period.

  e.g. electricity, telephone, indirect raw material, indirect labour like wages on commission
• Break even point: the amount of revenue necessary to cover the total fixed and variable expenses of a company within a time period. Total cost=total income
• Total cost= Primary cost + overhead expenses
• Unit cost= Total cost / number of units
• Selling Price= cost price + % profit on cost price
• Total revenue= selling price x number of units total
• Profit= total revenue-total costs
• Break-even point= fixed cost/ contribution margin (total revenue- fixed costs)