BU247 Chapter 5: Chapter 5 BU247.docx
Document Summary
Product costing systems are important because product volume and mix explain a large percentage of the costs that companies incur. If companies want to influence their costs, they must understand the relationship between the volume and mix of the products they produce and the expenses they incur. Product costing systems start by assigning direct labour and direct materials costs to products. Materials cost/unit = quantity of materials/unit of output x cost per materials unit. Labour cost/unit = quantity of labour hours/unit of output x cost per labour hour: add up all of the individual materials and labour costs to obtain the total labour and materials cost of each product unit.
