Question

How do the cost flows in a retail organization or service organization differ from those in a manufacturing organization?

Answer 1

Cost structure in retail organisation is totally different from those in manufacturing organisation.

Example of cost structure in Retail organization (Good selling) -

Cost of buying the goods      $5

Selling and admin OH            $2

Profit Margin                           $1

Price of the product             $8

Example of cost structure in Manufacturing organization -

Direct material       $1

Direct labour          $2

Packaging cost      $1

Manufacturing Overhead    $2

Seeling and admin OH       $1

Profit margin $1

Price of the product $8

For understanding of the cost flow example are provided this will make you clear about the cost structure.