Calculating Cost of Production

1. Calculating Cost
of
Production
Technology and Livelihood Education

2. Cost of production is the total price paid for resources used to
make a product or create a service to sell including raw materials,
labor, and overhead.
It is calculated by dividing the outputs produced by a company
by the inputs used in its production process. Common inputs are
labor hours, capital and natural resources, while outputs are generally
measured in sales or the number of goods and services produced.
CALCULATING COST OF PRODUCTION

3. What Is It?
To calculate the cost of food production, you need to know
the total cost of your ingredients along with how much each
ingredient is used in a recipe. This is important to know how much a
product costs.
To do this, you multiply per-unit price by the item you buy.
Add up all these individual prices to find the total food cost for your
dish. Calculating the cost of food production is important tool in
order to determine the cost of the food produced.

4. Principles of Costing
In a food business you need to know the total cost of the product before
you will sell it.
The following are the things to consider in calculating the cost of the
product.
1. Markup - is the amount added to the price cost. It can also be
stated as a permanent amount or as percentage of the total cost.

5. Principles of Costing
2. Selling price - is the price at which a product or service is sold.

6. Principles of Costing
3. Purchase Cost - is the price a buyer pays for the food bought.

7. Principles of Costing
4. Total Cost - is the total cost of food production.

8. Principles of Costing
5. Yield - is the amount of usable product after it has been
processed.

9. Calculating Markup& Selling Price
1. Peso Markup = Selling Price - Purchase Price
10.00

10. Calculating Markup& Selling Price
2. Percent Markup = Peso Markup ÷ Selling Price
10.00 28% or 29%

11. Calculating Markup& Selling Price
3. Selling price = Total Cost + Peso Markup
No. of Yield

12. For Example:
Compute the PESO MARKUP and the SELLING PRICE of PULVORON Product if given
this estimated cost of ingredients which produced 50 pcs. Pulvoron with 50%
markup.
FORMULA:
PESO MARKUP = (TOTAL COST X 50% MARKUP)
= 110.00 X .50 = P55.00
SELLING PRICE = TOTAL COST + PESO MARKUP
No. of Yield
= 110.00 + 55.00 = 165.00 ÷50 pcs. = 3.3

14. Direction: Identify the Principles of Costing that is being described:
1. Is the amount of usable product after it has been processed.
2. Is the amount added to the price cost. It can also be stated as a
permanent amount or as percentage of the total cost. -
3. Is the total cost of food production –
4. The price at which a product or service is sold. –
5. The price a buyer pays for the food bought. –
YIELD
MARK UP
TOTAL COST
SELLING PRICE
PURCHASE COST