Definition Of Cost Analysis

1. factors contributing to cost

The cost is mainly composed of the following three parts:

Direct raw materials;

Direct labor;

Manufacturing costs.

To put it simply, it is the labor cost, which is more significant in the manufacturing industry.

2. cost variance analysis

Before producing products, one of the first tasks is to prepare budgets or standards so as to control cost in the process of implementation.

This control is a comparison of absolute numbers, because no matter whether the budget is unreasonable, there must be some discrepancy between the actual cost figures and the budgetary or standards prepared in advance.

3. cost, quantity and revenue analysis

Because there are too many variables in the production process, there is always a discrepancy between the actual cost and the budgeted budget, so it is necessary to make some adjustments with the quantity of production or sales.

This adjustment is concerned with the control and analysis of relative cost, also known as profit and loss two leveling analysis or break even quantity analysis.

In addition, there is a need for a flexible budget, that is to say, a well prepared budget, that is, cost and cost, should reach a certain stock or operating income.