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Material
Cost
Material
Cost:
- Cost of all the different purchased items to
make a finished part.
Where
is the cost found?
- The cost for purchase parts is found in the
bill of material (BOM), along with the amount used, unit of measure and
cost per unit.
What
about packaging costs?
- Any packaging costs should be considered to be
included in the bill of materials. For some items this cost
can be substantial.
- These costs include boxes and skids, plastic
bags, etc
The
bill of materials (BOM):
- The bill of materials is usually maintained by
the materials department, since the Purchaser is part of this
department.
- The Cost Accountant may update the pricing in
the MRP system. The
Materials Department should notify her of a change in cost.
- The origination of the bill of materials begins
with the engineering department. This is because they are
involved in the launch of the new part.
Things
to watch out for:
- Be sure to include any shipping charges in the
cost of the part.
- In the case of raw materials such as steel, who
gets the scrap revenue? With the ever increasing cost of
commodities, this can be a very substantial item.
Other cost
elements:
Direct Labor
Indirect Labor
Burden
Administrative
Cost
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