The Value of Getting Your Costing Right - CAD Partners

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The Value of Getting Your Costing Right

Firstly what is ‘Costing’?

If you sell a product, it’s the cost of buying the product, plus preparing it for sale e.g. freight, storage, currency exchange, importation etc.

This excludes overheads e.g. rent, admin wages etc.

If you sell a service or jobs, it’s the cost of direct labour i.e. those who deliver the service and materials. As per products it excludes overheads.

If you manufacture goods it’s the costs of raw materials, labour, equipment, storage etc. as per selling a product.

Costing, or costs are sometimes referred to as Direct Costs, Cost of Goods Sold, Variable Costs in management reports.

It’s important to understand what are all the costs associated with a product or service, because you need to know that you’re making a reasonable margin i.e. the difference between sell price and cost price.

A reasonable margin covers overheads and contributes to profit.
It’s sometimes considered that selling more volume i.e. more product or service will fix lack of profit and cash flow.

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