The selling price of a product is the amount charged to consumers, calculated from production costs and other costs outside of production, such as distribution and promotion expenses.

Production costs are the expenses incurred to produce goods.

Elements of production costs:

1. Raw materials

2. Labor

3. Overhead

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​Overhead costs consist of 2 types:

Fixed Overhead

Overhead costs that do not change even when the quantity of production changes.

Examples: rent, electricity, etc.

Variable Overhead

Overhead costs that change proportionally with changes in the quantity of production.

Examples: glue, cleaning soap, etc.

The Cost of Production is the sum of these expenses.

​Full Costing

The full costing approach takes into account all elements of production costs, namely raw material costs, labor costs, and overhead costs, and is supplemented with non-production costs such as marketing expenses, as well as administrative and general expenses.

Variable / contribution Costing

The variable costing approach separates the calculation of production costs into variable and fixed components.