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close this bookFinancial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.)
close this folderI. Cost calculations in the handicraft industry
View the document(introduction...)
View the documentI. 1. Production costs
View the documentI.2. Overhead apportionment
View the documentI.3. Selling and distribution costs
View the documentI.4. Ways to reduce costs


The first thing a producer must know is—how much do the products cost to produce? Two types of costs are involved in production: Direct costs are those attributable specifically to the finished product; the main direct costs in handicrafts are labour and raw materials. Indirect costs (also called overheads) are all other costs incurred in the production unit, for example rent of workshop, administrative salaries, bank interest etc. Obviously all costs, both direct and indirect, have to be covered if a production unit is not going to make a loss. First, it is necessary to consider two questions: what are all the costs involved in production? And, how should the indirect costs be allowed for in the cost of each product?