Get out your calculator. You need to know;1) Cost of raw material.2) Labor cost.3) Is the cost of the machine used in production amortized into production of material? Or is it posted under capital expense? Same with heat, light and so on. Many companies include these costs in the actual "cost" of the item. Example: Every car that GM makes has it's benefit package paid to retirees is included in their cost of production and their sticker price for the car.
Assume only actual production cost. You take cost of raw material(s), divide by how many units you make from it. Example: You have 100lbs. Of steel bought at $100. You can make ten wheels from it. Each wheel costs you ten dollars in material. You take the workers wage of $100 for 10 hours. He can make 10 wheels in 10 hours. Labor cost is $10 per wheel. Cost =$10 + $10 =@20 cost of production.
Assume only actual production cost. You take cost of raw material(s), divide by how many units you make from it. Example: You have 100lbs. Of steel bought at $100. You can make ten wheels from it. Each wheel costs you ten dollars in material. You take the workers wage of $100 for 10 hours. He can make 10 wheels in 10 hours. Labor cost is $10 per wheel. Cost =$10 + $10 =@20 cost of production.
