What is Manufacturing Cost and Nonmanufacturing Cost?



In the process of making a product, there are three basic expenses: direct material cost, direct labor cost, and manufacturing overhead cost. The sum of these three costs is referred to as the “manufacturing cost” of a product. This total allows an owner to assign a cost to each unit produced so that “Inventory” and “Cost of Goods Sold” can be valued and reported according to generally accepted accounting principles.

A company also has nonmanufacturing costs. These costs include the sales, administrative, and loan interest costs incurred by a business. Knowing both the manufacturing costs and nonmanufacturing costs allows an owner to accurately price a product to make a profit.

In today’s manufacturing environment, when orders are filled in hours and days rather than weeks and months, it is critical for any enterprise to stay on top of these costs at all times. The best way to do that is with ERP software from SMe Software. For over twenty-five years their time-tested technology has been giving businesses the edge over their competition.

Solid ERP software like the SMARTer Manager system lets you make sure that your accounting is done according to generally accepted standards. It lets you post critical data to a real time dashboard so it can be continually and easily reviewed by managers, accountants, and owners. It lets you track key factors of both manufacturing and nonmanufacturing costs. Finally it will also let you run “what-if” studies in order to find the best and most efficient ways to run your business. SMe Software’s complete Manufacturing Management Software is highly configurable, completely integrated business software for the small to mid-size manufacturer.  

If you want the advantage of knowing, tracking and understanding your costs, then check out the SMe Software website. They can customize their software for an exact fit to your business needs today.