COSTING IN PRODUCTION

Meaning of costs of production. These are expenses incurred when producing goods and services.

Operational costs incurred by the business;
 Interest paid ie on the loan borrowed from our club patron
 Salaries/salaries and wages/ labour costs such as paying cleaners and most active workers shs 10,000 per the done work done.
 Stationery such as cash books, cash receipts, pens and pencils to record business transactions
 Utilities ie shs 3,000 was weekly spent on water bills and shs 30,000 per month on electricity.
 Advertising in the school magazine at a fee of shs 4,000 per advert made.

 Packaging ie the business purchased packaging materials like polythene bags at shs 5,000, paper bags 3,000 (100 pieces) among others.
 Storage costs
 Transport ie shs 3,000 paid to barrow boy pusher for transporting raw materials to the school premises.
 Depreciation for non-current assets of the business club.
 Discount allowed/sales discount ie 2% to customers who buy and pay cash.
 Commission paid to sales persons of the business ie shs 2,000 for every 50 chapattis sold and plates of pilawo.
 Bad debts/bad debts written off due to failure of the business club customers to clear their debt obligations were expensed off in the income statement.
 Fines and penalties paid due to failure of the business club to pay to our suppliers on time shs 2,000 per day delayed was to be paid.
 Taxes
 Repairs/maintenance costs. Ie the repair of blending machines was shs 10,000 per repair.
 Packaging. Shs. average of shs 60,000 was spent termly on purchasing packaging materials like boxes, wrappers, polythene bags etc.

Describe at-least five administrative expenses of the club
 Audit fees expenses (legal accountancy charges)
 Postage expenses
 Stationery expenses
 Communication / airtime expenses
 Heating and lighting
 Administrative salaries and allowances
 Depreciation of furniture
N.B these are expenses incurred by the business during formulation of the business policy, direct control, management and supervision of its affairs
Selling and distribution overheads. These are indirect cost incurred during the selling and distribution of goods and services. Examples of selling and distribution
overheads include.
 Advertising
 Sales promotion
 Delivery expenses / carriage outwards
 Salary of foremen
 Cost of samples given to potential buyers
 Free gifts
 Displays and exhibition materials
 Printing and stationary (for receipts , price lists, catalogues, invoices etc)
 Packing cases
 Insurance for ware house, delivery vans etc.
 Direct costs/ prime costs ie costs that can be specifically identified with a particular department or process examples include, direct materials (cooking oil, salt), direct labour costs/direct wages, direct expenses like loyalties
 Indirect costs/overheads ie costs incurred during production but which cannot easily be traced to the items being manufactured examples include, utilities ie power and water, depreciation of machines for the business club

The video below explains  more about costs incured in production