Question

Identify the different types of product (manufacturing) and non-production costs. In addition, describe the changes in composition of total manufacturing costs during the last century

Answer 1

The Product based or manufacturing costs are the Direct Material costs, Direct Labor costs and the Manufacturing overhead costs which provides their 100% to the product’s production.

The non-manufacturing costs includes the product development costs, distribution and selling costs, marketing and administration costs.

The change that are taken place in the composition of Total Manufacturing Costs are:

a) A lot of the manufacturing costs are inclined towards the labor cost ie. 50% or more, due to less techno-mechanical development during first decade of 1900’s. But later on, the labor cost starts counting on at the rate of 15% to 20% in the whole manufacturing costs.

b) The material costs keeps their proportion of 50% to 60% in the whole manufacturing costs during the last century.

c) There has been a drastic change towards upward of the Period/Product/Fixed costs portion in the whole manufacturing costs during the last century. Due to the production been more of mechanical type, the product/period costs increases rapidly in the manufacturing costs. Costs like Depreciation, Repair and Maintenance, Product design and development, engineering and machine setup costs, Distribution and selling costs, marketing and administration costs,etc. have increased many a folds. In the beginning of 2000’s, around 40% to 50% of the total manufacturing costs constitutes the Period/Product/Fixed costs.