If you want to get a job at a manufacturer, you should know "What is" cost "?"

Figure 10-1 Relationship between manufacturer activities and manufacturing costs

The job of a manufacturer (manufacturing industry) is "manufacturing" to make and sell products such as automobiles, electric appliances, and foods. What is the "cost" that manufacturers always hear? It seems to be a matter of course, but I will introduce the basics that anyone who wants to become a manufacturer should know exactly from the book "Work of all illustrated manufacturers Demand forecasting, product development, inventory management, production control, logistics mechanism". .. [See the image in this article] One of the words that people working at manufacturers often hear is "cost". For example, "Overseas factories have succeeded in reducing costs by improving processes" and "The cost of this new product is too high and the profit margin is thin". However, it is also true that there is a range of meanings used by people. In this chapter, we will broaden the scope of the expression "cost" as "the amount of money required to make a product" and sort out its meaning and position in the activities of manufacturers. In accounting terms, this cost is called "manufacturing cost". ● Why is it necessary to understand the cost? He is based on the flow of purchasing raw materials, making products, and selling them to customers. If this activity is reconsidered in terms of the flow of money, it can be said that it is an activity to add profit to the total of the amount paid to purchase raw materials and the various amounts paid to process raw materials and sell it to customers. .. And, in order to continue this activity, it is strongly desired that the sales amount exceeds the amount of money required to make the product, that is, the product is made at a cost that can make "profit". There are two ways to do this. 1. 1. Keep the amount of money to make a product (the sum of the amount of money purchased for materials and the amount of money required to operate a factory) low. Both of his approaches to selling products made for the same price at a higher price assume that "how much it cost to make the product" is known. You need to understand the factors involved in the cost of the product and consider how to manage them. In this way, it is essential to understand costs in the activities of manufacturers. ● What is included in "cost"? He roughly divides the work of people who work at manufacturers into activities that actually handle "things" such as purchasing, production, and sales, and office work that plans the contents. I have. "Cost" in the sense of "the amount of money it took to make a product" in a manufacturer is the amount of money mainly used for factory activities. For example, in the short story "Ippon no Pencil Beyond" by poet Shuntaro Tanikawa, a pencil factory purchases raw materials such as wood, graphite, and clay from overseas and processes them in various ways to finish the product. It was. In other words, the total cost of these activities is the cost of the pencil. If you go a little further and organize it, you can see that the money is spent on the following contents. ● Purchase price, transportation cost, storage fee, etc. of pencil raw materials (wood, graphite, clay, etc.) ● Wages of the person in charge who worked in the process of manufacturing pencils, etc. ● To operate the equipment that processes pencil raw materials Electricity bills, lubricating oil bills, etc. ● Other spending to maintain the functions of the entire factory, which are thought to have contributed to the activities to produce pencils, are all stories of money coming out of the company's wallet. However, the value obtained in exchange is converted into the tangible and intangible elements that make up the product, and in fact, the value of the money that the company originally had is not lost. In accounting terms, it's a bit technical, but in accounting terms, factory activity at a manufacturer is the process of converting a company's assets, such as cash and deposits, into another asset, inventory. (Fig. 10-1). ● Cost (manufacturing cost) is not equal to cost of sales As some of you may have noticed by reading this far, the money (cost) required to make a product is not necessarily the cost of sales. Not. As the name "Cost of goods sold" means, the cost of goods sold refers to the cost of the products produced by the manufacturer that are actually sold to the customer (Fig. 10-2). .. Manufacturers cannot always sell all the products they produce, so if there are products that are not sold and remain in stock, the cost of goods sold is not included in the cost of goods sold. As you can see, manufacturing cost and cost of sales are similar in terms of wording, and both of them include the word "cost" when expressed in English, so it should be noted that it is a little confusing. While manufacturing cost is a concept for grasping the amount of money related to a company's assets, cost of sales is a concept for grasping the profit and loss of a company, and it is easy to understand from the viewpoint of each role.

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