Product Cost Analysis Definition
Product cost analysis is the process of evaluating the cost of a product or service. The purpose of product cost analysis is to understand the cost drivers of a product or service and to identify opportunities to reduce costs.
Product cost analysis typically includes the following components:
1. Direct materials costs: The cost of all materials used in the production of a product or service. This includes raw materials, component parts, and packaging.
2. Direct labor costs: The cost of all labor required to produce a product or service. This includes wages, benefits, and other forms of compensation paid to workers.
3. Manufacturing overhead costs: The indirect costs associated with manufacturing a product or service. This includes rent, utilities, property taxes, depreciation, and other factory-related expenses.
4. Selling, general, and administrative (SG&A) expenses: The indirect costs associated with selling and marketing a product or service. This includes advertising, sales commissions, office expenses, and other general corporate expenses.