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LSDefine
Simple English definitions for legal terms
manufacturing cost
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A quick definition of manufacturing cost:
Manufacturing cost is the amount of money it takes to make a product. This includes the cost of materials, labor, and other expenses. It is important for businesses to know their manufacturing cost so they can price their products correctly and make a profit.A more thorough explanation:
Manufacturing cost refers to the expenses incurred in the production of goods. It includes both direct costs, such as the cost of materials and labor, and indirect costs, such as rent and utilities.
For example, if a company produces 100 units of a product and the total cost of materials, labor, rent, and utilities is $10,000, then the manufacturing cost per unit is $100.
Manufacturing cost is an important factor in determining the price of a product. If the manufacturing cost is high, the price of the product will also be high. Companies try to reduce manufacturing costs to increase their profit margins and remain competitive in the market.