What is Product Cost

A manufacturer's product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is also referred to as factory overhead, indirect manufacturing costs, and burden.)

A manufacturer's product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is also referred to as factory overhead, indirect manufacturing costs, and burden.) - Product cost refers to the costs used to create a product.Product cost can also be considered the cost of the labor required to deliver a service to a customer. **The purposes of computing product costs are as under:** -Preparation of Financial Statements – with focus on inventory valuation. -Product pricing – focus on costs assigned and incurred on the product till it is made available to the customer / user. -Cost-plus-Contracts with Government Agencies – where the focus is on reimbursement of costs specifically assigned to the particular job/contract

Dear Friend > Product Cost These are the costs, which are assigned to the product and are included in inventory valuation. These are also called as Inventoriable costs. Under absorption costing, total manufacturing costs are regarded as product costs while under marginal costing, only variable manufacturing costs are considered. The purposes of computing product costs are as under: 1. Preparation of Financial Statements – with focus on inventory valuation. 2. Product pricing – focus on costs assigned and incurred on the product till it is made available to the customer / user. 3. Cost-plus-Contracts with Government Agencies – where the focus is on reimbursement of costs specifically assigned to the particular job/contract. Thanks