Product cost analysis is basically an assessment of the estimate of the entire production cost of a certain product. The analysis takes into account both manufacturing cost and marketing cost and also looks into the various factors that may be responsible for changing the price indices of the product. It plays a crucial role in fixing market prices and other related management decisions.
Sample Product Cost Analysis:
Product Cost Analysis Done By: R. S. Greene.
Name of the Company: EasyTravel Gear Company
Product: Cooltravel Backpacks
Product History: Cooltravel backpacks are the latest addition to the series of travel gears produced every year for the delight and comfort of those bitten by the travel bug. The backpacks are extremely stylish, designed primarily for regular adventure travelers and of superior quality. They are strong enough to withstand all kinds of weather conditions that one may encounter while traveling and are enormously spacious and easy to carry.
Raw Materials involved for manufacture and their estimated costs:
- Fabrics – polyester/ nylon/ PVC – 28-56$
- Chains – 10-15$
- Straps – 11-18$
- Zip puller – 2-8$
Production Costs: The total production cost of the material amounts to 124$ including labor charges, machine charges, cost of materials used and all other costs associated with the manufacture of the backpacks.
Packaging Costs: The backpacks must be attractively packaged in order to create a good impression with the customers. An estimate of 28$ may be allotted for proper packaging of the backpacks before they hit the market.
Marketing Costs: In order to increase sales, the backpacks must be well marketed. Since the target customers are regular adventure travelers, advertisements in travel websites, travel magazines and travel programs may be the best way to market the product. An estimate of 200$ may be spent in promoting the market in the market.
Inference: The analysis shows that the product demands a minimum of 350$ as its product cost.