Financial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.): I. Cost calculations in the handicraft industry: (introduction...)

Financial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.)

I. Cost calculations in the handicraft industry

		*(introduction...)*
		I. 1. Production costs
		I.2. Overhead apportionment
		I.3. Selling and distribution costs
		I.4. Ways to reduce costs

(introduction...)

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?