SETTING OF

EXPECTATIONS
WHAT IS
COST?
 Cost
the value
of money that has
been used up to
produce something
WHAT IS
PRICE?
 Price
is
the quantity of payment given
by one party to another in
return for goods or services
 ACTIVITY 1

Write the NAME and PRICE of your product in

the manila paper given to you

Example

Product: Doormat
Price: 35.00
 Types of Cost

Direct Material Cost

Direct Labor Cost

Manufacturing Overhead

Operating Expenses
Direct Material Cost
Raw materials used
directly to the product
or services. These
materials become a
physical part of a
finished product.
 Direct Labor Cost
Human effort directly
involved in the production process.
Money spent on wages, salaries and
benefits of the employees involved
in making the products and in
rendering the services.
Manufacturing Overhead
Other expenses incurred in
making the products or in
rendering the services.

It includes:
Indirect Material Costs
Indirect Labor Costs
Other Indirect Manufacturing Cost
 Operating Expenses
Other expenditures
involved in running the
business apart from the
production process, namely:

Administrative Expenses
Selling Expenses
Direct Material
Costs
+
Direct Labor
Costs Total
+
Manufacturing  Costs
Overhead
+
Operating
Expenses
 Example 1
Assumption: production capacity of 10 doormats

Product: Doormat
Price: 35.00/unit
Direct Materials:
Used Cloth (2kg) 100.00
Threads 20.00
Direct Labor:
Salaries (5 per product) 50.00
Manufacturing Overhead:
Electric Bill 15.00
Transportation-Purchasing 20.00

Operating Expenses:
Transportation-Selling 20.00
Commission 50.00
TOTAL COST 275.00
 Example 2
Ms. Madish Karte observed that
no one sells “meryenda” in their
place and decided to sell Banana
Cue. The following are the
expenditures incurred in selling
Banana Cue.
 Cost per Unit
Banana 100 pcs @ 1.50/pc
Brown Sugar 5 kgs @ 50/kilo
Cooking oil 3bottles @ 20.00/bottle
Cooking gas 200.00 (good for 5 uses)
Sticks 2 bundles @ 10.00/bundle
Transportation 20.00

Ms. Madish Karte can produce 50 pcs of Banana Cue of the

100 pcs. of Banana.
 Costing
Direct Material Cost
Banana 150.00
Brown Sugar 250.00
Sticks 20.00
Manufacturing Overhead
Cooking oil 60.00
Cooking gas 40.00
Transportation 20.00
Total Cost 540.00
 ACTIVITY 2

With your groupmates,

identify the cost of your products and
present your outputs.
 Benefits of Costing
Helps you in setting
price to generate income

Helps you in planning

Helps you in decision

making
How do we price?
Cost-Plus Pricing

Penetration Pricing

Discount pricing
 How do we price?
Prestige pricing
Competition-based pricing
Demand-oriented pricing
HOW DO WE
How to reduce cost?
Manage Time Efficiently

Reduce Expenses

Maximize Resources

Ensure Quality Produce

THANK YOU!!!