Manufacturing costs are the funds and costs associated in the business for one time
To know the costs required for the business, in production
Do be used in determining the cost of selling the product or to determine the price
To determine that when the product is sold, you get a profit or loss
The cost of materials
The cost of equipment
The cost of labour
The cost of materials for packaging
The cost of electricity and water
The cost of transportation
The cost of promotion and advertising
The cost of management and co-ordination
Depreciation of fixed assets. When talking about depreciation, many people do not understand. Depreciation means the costs arising from the use of the asset. Its costs which must be included in profits and loss. In most cases it includes things that are used, equipment that is used over many years or seasons, and has a high cost. These are called fixed assets. For example, tractor, oven (lumyai, lynchee), pig housing, sewing machine.
Method for determining depreciation
The depreciation each year can be determined each year as follows;
For example:
|
Bought tractor 1st May 2000 |
8,000 Baht |
|
|
(Working age of 5 years, depreciation value is 8,000/5 = 1,600B) |
|
|
|
Depreciation Year 1 |
1,600 Baht |
|
|
|
Remaining |
6,400 Baht |
|
Depreciation Year 2 |
1,600 Baht |
|
|
|
Remaining |
4,800 Baht |
|
Depreciation Year 3 |
1,600 Baht |
|
|
|
Remaining |
3,200 Baht |
|
Depreciation Year 4 |
1,600 Baht |
|
|
|
Remaining |
1,600 Baht |
|
Depreciation Year 5 |
1,600 Baht |
|
|
|
Remaining |
0.00 Baht |
Recording depreciation is capitalising your business. In the profit/loss book, this can be recorded on monthly, periodically, production season depending on the suitability in determining the profit and loss for each occupation. For example, flower planting determines depreciation for spraying equipment on a monthly basis, when they harvest the flowers and must determine the profit and loss of planting flowers on a monthly basis.
Other costs are dependent upon the type of business
This is determined by comparing the income with manufacturing costs.
Profit means the money made from the income which is more than the manufacturing costs or selling the product at a cost higher than the capital investment.
Loss means the amount when the income is less than the manufacturing costs
Points to consider
Sometimes there are no costs, for example no costs occur when raw materials from the area are used. However, you should estimate their costs when thinking of the manufacturing costs. As, in the future, you may have to purchase those materials, when there greater amounts are required. For example, the bamboo around the village may disappear if a lot is used, so you may have to buy from other villages to use. To ensure a continuing supply of natural resources to be used in the future, everyone should help to conserve environment and natural resources by replanting the resources.
