Ways to lower production cost and maximized profit in A Manufacturing company

1. WAYS TO LOWER PRODUCTION COST AND
MAXIMIZED PROFIT IN A MANUFACTURING
COMPANY

2. What is the cost of company
Cost are the amount that a business incurs in order to make
goods and /or provide service.
in other word,
manufacturing cost is the sum of costs of all resources
consumed in the process of making a product.

3. Manufacturing company have three
basic types of cost
o Direct material cost
are the raw material that become a part of the finished Direct
materials product.
o Labour cost
The labour cost is the cost of workers who can be easily
identified with units of production.
o Manufacturing Overhead
Manufacturing overhead is any manufacturing cost that is
neither direct materials cost or direct labour cost.

4. Ways to lower production cost in a
manufacturing company
 Reduce direct material cost
Direct material cost constitutes a substantial portion of the total
manufacturing costs.
There are a number of techniques to control the direct material
cost.
 Invite quotations from as money suppliers as possible
 Consider signing a long-term contract with the short listed
supplier. Who in turn can reduce the price eccordingly.
 Offer cash payment in return of cash discount most
suppliers will be willing to trade off discount in return of
prompt payment.

5.  Reduce carry cost of inventory
Carry cost of inventory is the cost incurred to hold,store &
maintain the inventory over a period of time. Inventory also
include row material & work-in progress material.

6.  Increase workers’ Efficiency
Reducing employees’ remuneration is not a great option because
it results in employee dissatisfaction and ultimately in hiring and
retaining unkilled employees.
A more wiser approach would be to improve the labour
efficiency. It's not easy but definitely worth the effort.

7.  Control Manufacturing overhead
Manufacturing overhead is all indirect costs incurred during the
production process. This overhead is applird to the units
produced within a reporting period.
And also when decrease this overhead cost and total cost is also
reduce. (eg:- advertising fee, telephone bills,travel expenditure)

8. IMPORTANCE OF DEVELOPING COST
REDUCTION TECHNIQUES
 It helps to enhance management performance or efficiency.
 It helps to know the nature of cost.
 It helps to reduce the reduce the cost of operation of the
organization.
 It helps to increase profit or return.
 It helps to set competitive price of product or service.

9. What is profit maximization
 The profit maximization rule states that if a firm chooses to maximize its
profits, it must choose that level of output where marginal cost (MC) is
equal to marginal revenue (MR) and the marginal cost curve is rising. In
other words, it must produce at a level where MC = MR.

10. IMPORTANCE OF PROFIT
 Increase the business growth.
 Increase the owner income.
 Increase the company goodwill.
 Increase the retain earnings.

11. THANK YOU!!