Question

How difficult is it to determine the cost of a product from the perspective of the company producing the product?

Answer 1

It is a long and detailed process to determine the cost of product. Cost accounting helps the management to determine actual cost of the product. Cost accounting is an accounting method that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs, such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.

Product cost include Direct labour , Direct material , Overhead , So Management need to do accurate calculation on these components.

There are some indirect expenses also like indirect material, indirect labour and other costs, do it also need to calculate these cost.

Due to different method of costing like ABC costing, batch costing , job costing so it's also a point to consider for a management to know which method will be better to calculation.

So these overall conditucon makes difficult task to determine the cost of the product.