For the financial departments of manufacturing companies, few things are as important as inventory valuation. Due to the effect on the gross profit of a company, choosing the right inventory valuation method is a crucial step in ensuring the financial health of your company.
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There are several ways to classify the costs associated with the production of goods. Production managers rarely need to look away from total manufacturing costs, which consist of direct material costs, direct labor costs, and manufacturing overheads. However, production accountants and business owners often need to see the bigger picture.
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Manufacturing overhead is comprised of indirect costs related to manufacturing products. It is an essential part of manufacturing accounting and as such, it should be one of the key factors in determining the prices of your products.
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Inventory costs make up a substantial part of any manufacturing or distributing company’s total expenses. To ensure the good financial health of your business, it is necessary to know how to make sense of these expenses and how to balance them.
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Job costing means tracking the costs related to individual orders. This allows accounting to measure the profitability of each project separately and to use it as a basis for customer quotes and financial planning.
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Capacity planning is an essential tool used in well-functioning manufacturing companies. It determines the necessary capacity required to meet demand and as such, it is a prerequisite for efficient production scheduling, supply chain planning, inventory management, and any other aspect of the business.
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Total Manufacturing Cost is an essential metric for understanding the productivity and profitability of a business. Among other things, it can be used to adjust the selling price of your products and to identify and cut unnecessary expenses.
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Finding the right selling price for your products is a delicate process with many moving parts. Here are some tips to help you better understand that process.
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Knowing your Cost of Goods Manufactured is a good way of getting an overview of production costs and how they relate to the bottom line. Calculating COGM allows management to identify cash drains, adjust prices, and track the development of the business. You can also listen to this article:
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The inventory turnover ratio is a good indicator of the performance of your company. Find a balance between sales and stock by using these formulas and tips.
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The Cost of Quality is the sum of the costs related to providing a quality product and the costs related to not providing a quality product. While an effective measure to identify cash drains, it can also be used to balance the price and quality relationship of your products.
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Although a periodic inventory system might seem clear-cut and foolproof at first glance, its disadvantages may outweigh the benefits. Perpetual inventory systems, however, are already becoming mainstream.
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