7.4 Selling Price

SELLING PRICE

Steps of Costing calculation under Selling price Method

Step 1: Summary selling price for each product

In this step, declaring the selling price for each finished good code, same as declaring the coefficient. SB should have an excel file to make it import easily for users.

Step 2: Total quantity of finished goods input warehouse during the period (same as BOM)

At this step, data is only entered into SB through the finished good import vouchers

Step 3: The total of unfinished goods and converting to finished products (same as BOM)

The software will create a separate section related to entering work-in-process materials and completion rate. At the same time, It sets up the formula to convert from unfinished goods into equivalent finished goods.

Noted: A product can have many completion rates. Because, it can be at the beginning, middle or ending stage of manufacturing process.

For example :

After calculating the equivalent products with different completion rates, the software will sum up each of product code which converted to the equivalent product. As in the above example, after calculating work-in-process with different percentages, the total of equivalent finished goods of this code will be shown as follows:

Each work-in-process code is assembled into each line and show the total of final equivalent converted product, because the result of this part will be used to calculate the value of unfinished goods in next Step.

Step 4 : Calculate the number of products manufacturing during the period (same as BOM)

There is always a logic in the manufacturing as follows :

Unfinished goods at the beginning of the period + the product manufactured during the period -> manufacturing -> finished goods + unfinished goods at the ending of the period.

Therefore , the formula of the manufacturing process:

Unfinished goods at the beginning of the period + the product manufacturing during the period = finished goods + unfinished goods at the ending of the period.

Then, If knowing three factors of this equation It can be calculated the remaining factors. And here, there are some value always defined as below:

1. Quantity of unfinished goods at the beginning of the period (from the previous period forward),

2. Finished goods manufactured during the period and

3. Unfinished goods at the end of the period (provided by the customer's inventory)

🡺 Products manufactured during the period = Finished goods + unfinished goods at the end of the period – unfinished goods at the beginning of the period

On the SB, It will be setup to calculate the quantity of this manufactured products

Step 5 : Calculate the costing for products according to the selling price percentage

This step of allocating direct material costs, labor costs and manufacturing overhead costs to each product according to the selling price.

Step 6: Calculate the value of unfinished goods ending period

The value of unfinished goods at the end of period is calculated according to the formula:

The equivalent finished goods * unit cost

The equivalent finished goods are determined at step 3, the unit cost is determined at step 5

Step 7: Determine the value of finished goods input warehouse during the period

At this step, the manufacturing equilibrium equation is used to determine the value of finished goods input warehouse during the period .

The value of finished goods input warehouse during the period = Value of unfinished goods at the beginning of the period + incurred manufacturing costs during the period – Value of unfinished goods at the end of the period

After calculating the value of input warehouse product-> determining the unit cost of products = total value of input product / total quantity of input finished products (determined at step 2)