Question

• What are the primary challenges in determining the costs of units of production or service?

Answer 1

Primary challenges in determining the costs of units of production or service are as follows :-

1. Basically we need to calculate all the cost incurred for production of products or rendering services

2. Classification of total cost into fixed cost and variable cost

3. Calculation of overheads

4. Allocation of overheads

5. Deciding the method and policy of allocation of overheads among the production.

6. In case of services there is a major problem that is valuation of human work and deciding the cost of service.

7. Calculation of normal and abnormal loss

8. Treatment of normal and abnormal loss in the pricing or costing of the product.

9. Taxes paid on the production or services

10. At a last step profit margin to be added to the units of the production.

These are all the problem and primary challenges in determining the costs of units of production or service.

I hope, all the above mentioned information is useful and helpful to you.

Thank you.