The finished product in a manufacturing concern is the outcome of a number of costs which enter into its production. The determination of the total cost of a product is an important function of the costing department of an entity where different costs are systematically accumulated. In general terms, it may be stated that cost which enter into production relate to materials, labor and overheads for the factory, office and selling and distribution channels. All such costs are then attached or accumulated to from the total costs of the products. In practice, a detailed procedure has to be followed to group and regroup the costs according to their characteristics. For instance, there may be direct costs of material, labor and other expenses which can be easily identified or associated with the product and therefore, they are conveniently classified as material and labor costs. On the other hand, when difficulty is encountered to trace the costs to a particular product, they (costs) are grouped under the general heading of overheads which allocated to different product units according to suitable method. For instance, if a machine is being used to produce more than one product, its cost (depreciation) may be allocated on the basis of machine-hours used for the production of the product. The total cost however is arrived at by adding the costs of material, labor and a proportion of indirect overheads which cannot be easily traced to a product. It may be added that the costs so attached do not give exact idea about the work or the value of the product which may be more or less than the attached cost. The value depends on the sale price of product. However, the classification of costs enables the management to improve the quality of the product and control the costs where necessary.

For more help in The Cost Attach Concept click the button below to submit your homework assignment