CHAPTER III

COST OF PRODUCTION

3.1 Practicum Objectives
The practicum has several objectives that hoped to be achieved by the students. Those are:
1. Students are able to identify component’s cost of production.
2. Students are able to develop the precise cost of production system.
3. Students are able to understand cost production planning in an industry.
4. Students are able to determine the appropriate location for the right order.

3.2 Practicum Tasks
Tasks of the practicum are elaborated as:
1. Calculating cost of production
2. Calculating selling price of product
3. Determining location of the right order

3.3 Result and Discussion
Based on the practicum, we have gained several results that at the end could present the total
cost, in which further would decide the right location of the right order.

3.3.1 Demand Proportion
The company X is a private company that contributes in manufacturing, especially to produce
product X that is headquartered in Balikpapan, Kalimantan Timur province. In order to fulfill
stocks in Java, the company has several branches in Surabaya and Bantul. The product is 1
product type that is appropriate with SWOT analysis and balance scorecard. One product type
has 3 different kind of products that having different targets according to cluster analysis,
with different materials price depending on its cluster. Product X1 is a product consists of
group clusters that need highest material price. Product X2 consists of group cluster that
needs moderate material price, and product X3 consists of group cluster that needs the lowest
material price.

On November 4 2013 Company X receives order quotation as 4050 units of product.
Those 4050 units are as the accumulation from total production of product X1, X2, X3.

However, production amount for each car type will be produced based on number of cases on
the cluster analysis. Products margin of product X1, X2, and X3 adjusted each condition in
each company and its grouping based on the cluster analysis, where generally the most
expensive product has the highest profit margin. Tax on each type is 8% and saving cost is
8% taken from full costing. By calculating considerations of 2 alternatives of branch
production, we can decide the right location. Thus the demand proportion for each product
could be calculated as:

Table 3.1 Final Clusters
Cluster
1

2

3

Zscore (X1)

0.39452

-0.57385

0.28692

Zscore (X2)

0.30798

-0.55821

0.33423

Zscore (X3)

0.15195

-0.85217

0.74166

Zscore (X4)

-1.41484

0..48220

0.54678

Zscore (X5)

-0.78558

0.38417

0.18716

Zscore (X6)

-0.23157

0.24896

-0.08055

Zscore (X7)

-0.48685

0.92861

-0.57454

Table 3.1 shows the final clusters, gained from previous practicum that involving 30
respondents asked based on 7 variables to be considered for purchasing a car. From this final
cluster, we then could classify those data into three clusters, in which each of clusters has
different characteristic regarding their perceptions of purchasing decisions. Those clusters are
grouped as in Table 3.2.

Table 3.2 Number of cases in each cluster
Cluster 1

8.00

Cluster 2

11.00

Cluster 3

11.00

Valid

30.00

Missing

0.00

Table 3.3 Cluster proportion in percentage

Percentage

Cluster 1

Cluster 2

Cluster 3

26. 67 %

36.67%

36.67%

According to the cluster grouping explained above, we calculate unit of products to be
manufactured for each product types. Given by formula, then we could decide how many
products to be produced in this stage. It is then shown in Table 3.4.

Table 3.4 Total Demands
Total Demand
4050

Product X1
1053

Product X2
1485

Product X3
1485

3.3.2 Raw Materials Cost Calculation
Raw material price is a cost expanded to all the materials that physically could be identified as
a main part from product. It can be directly inputted in product cost calculation. It is acquired
from multiplying raw material cost with demand. Material cost in Bantul for Product X1 is Rp
126,360 M, Product X2 is Rp 172,275 M, Product X3 is Rp 163,364 M. Material costs in
Surabaya for Product X1 is Rp 114,777 M, Product X2 is Rp 148,513 M, and Product X3 is
Rp 145,543 M; as explained in Table 3.5.

Table 3.5 Raw Material Cost
Purchasing Location

Product X1

Product X2

Product X3

Bantul

Rp126,360,000,000 Rp172,275,660,000 Rp163,364,850,000

Surabaya

Rp114,777,000,000 Rp148,513,500,000 Rp145,543,230,000

3.3.3 Overhead Cost Calculation

Table 3.6 Overhead Rate
Location

Overhead Rate in Each

Predetermined

Location

Overhead Cost

Bantul

Rp316,721.31

Rp11,401,967,213.11

Surabaya

Rp320,967.74

Rp11,233,870,967.74

3.3.4 Depreciation Cost Calculation
Depreciation is an impairment of physical goods along with the usage and time. Method of
calculating the value of depreciation is a straight-line depreciation method that gives the
possibility to shrink an asset in a constant speed during the shrinkage takes place. The
following is a formula of depreciation cost:

(

)

Table 3.7 Machines and Equipment Depreciation Cost
Type

Annual Depreciation Charge Depreciation per Product

ASSEMBLY MACHINE

1,290,909,090.91Rp

Rp430,303,030

CUTTING MACHINE

Rp1,596,875,000

532,291,666.67Rp

Table 3.8 Building Depreciation Cost
Location

Annual Depreciation Charge Depreciation per product

Bantul

Rp6,000,000,000

Rp2,000,000,000

Surabaya

Rp10,000,000,000

Rp3,333,333,333

Table 3.9 shows the miscellaneous costs that consist of building insurance,
administration, indirect workers, electricity, and machine maintenance. Value proportion of
each cost has been determined. Thus, by multiplying predetermined overhead cost with the
percentage of miscellaneous overhead, we get miscellaneous depreciation cost as shown
below:

Table 3.9 Miscellaneous Depreciation Cost
Cost Type

Bantul

Surabaya

Building insurance

Rp114,019,672

Rp112,338,710

Administration

Rp342,059,016

Rp337,016,129

Indirect workers

Rp4,120,670,951

Rp4,312,683,065

Electricity

Rp1,140,196,721

Rp1,123,387,097

Machine Maintenance

Rp1,710,295,082

Rp1,685,080,645

3.3.5 Job Cost Sheet Calculation
Job costing system is a method of collecting production costs that are applied to companies, in
which produce variations of product according to the specifications of the order, so that the
mode of production and type of each order can be clearly separated identity. Cost of
production is calculated for each product that is made based on the type of order. The
formulas in job costing are written as follows:

Table 3.10 Job Cost Sheet for Inception X1 - Bantul
PT PSIT II
JOB COST SHEET
Nomer Order :

1

Tipe :

produk :

Mobil

Jumlah unit:

Tgl

Notifikasi

Raw Materials Cost

Inception X1

Perhitungan Biaya

Jumlah jam kerja x upah

Rp126,360,000,000

Rp9,900,000,000
Pre determined overhead cost

Rp9,900,000,000

Rp11,401,967,213
Rp11,401,967,213

Jumlah unit x biaya transportasi

Rp11,401,967,213

Rp2,106,000,000
Rp2,106,000,000

Total
Biaya Produksi

Biaya Total

Total

Rp9,900,000,000

Total

Biaya Simpan

Biaya Yogyakarta

16-Nov-12

Rp126,360,000,000

Total

Biaya Transportasi

No.dok

Rp126,360,000,000

Total

Factory Overhead Cost

1053

Duedate:

date order :

Direct Labor Cost

Inception X1

Rp2,106,000,000
Rp149,767,967,213

8% from full costing

11,981,437,377.05Rp

Rp11,981,437,377
Rp161,749,404,590

Table 3.11 Job Cost Sheet for Inception X2 - Bantul
PT PSIT II
JOB COST SHEET
Nomer Order :

2

Tipe :

produk :

Mobil

Jumlah unit:

date order :
Tgl

Inception X2
1485.135

Duedate:
Notifikasi

Perhitungan Biaya

No.dok

Biaya Yogyakarta

16-Nov-12
Total

Raw Materials Cost
Inception X2
Total

Rp172,275,660,000
Rp172,275,660,000

Rp172,275,660,000

Direct Labor Cost
Jumlah jam kerja x upah
Total

Rp9,900,000,000
Rp9,900,000,000

Rp9,900,000,000

Factory Overhead Cost
Pre determined overhead cost
Total

Rp11,401,967,213
Rp11,401,967,213

Rp11,401,967,213

Biaya Transportasi
Jumlah unit x biaya transportasi
Total

Rp2,970,270,000
Rp2,970,270,000

Biaya Produksi

Rp2,970,270,000
Rp196,547,897,213

Biaya Simpan
8% from full costing
Biaya Total

Rp15,723,831,777

15,723,831,777.05Rp
Rp212,271,728,990

Table 3.12 Job Cost Sheet for Inception X3 - Bantul
PT PSIT II
JOB COST SHEET
Nomer Order :

3

Tipe :

produk :

Mobil

Jumlah unit:

date order :
Tgl

Inception X3
1485.135

Duedate:
Notifikasi

Perhitungan Biaya

No.dok

Biaya Yogyakarta

16-Nov-12
Total

Raw Materials Cost
Inception X3
Total

Rp163,364,850,000
Rp163,364,850,000

Rp163,364,850,000

Direct Labor Cost
Jumlah jam kerja x upah
Total

Rp9,625,000,000
Rp9,625,000,000

Rp9,625,000,000

Factory Overhead Cost
Pre determined overhead cost
Total

Rp11,401,967,213
Rp11,401,967,213

Rp11,401,967,213

Biaya Transportasi
Jumlah unit x biaya transportasi

Rp2,970,270,000

Total

Rp2,970,270,000

Biaya Produksi

Rp2,970,270,000
Rp187,362,087,213

Biaya Simpan
8% from full costing
Biaya Total

Rp14,988,966,977

14,988,966,977.05Rp
Rp202,351,054,190

Table 3.13 Job Cost Sheet for Inception X1 - Surabaya
PT PSIT II
JOB COST SHEET
Nomer Order :

1

Tipe :

produk :

Mobil

Jumlah unit:

date order :
Tgl

Inception X1
1053

Duedate:
Notifikasi

Perhitungan Biaya

No.dok

Biaya Tangerang

16-Nov-12
Total

Raw Materials Cost
Inception X1
Total

Rp114,777,000,000
Rp114,777,000,000

Rp114,777,000,000

Direct Labor Cost
Jumlah jam kerja x upah
Total

Rp17,000,000,000
Rp17,000,000,000

Rp17,000,000,000

Factory Overhead Cost
Pre determined overhead cost

Rp11,233,870,968

Total

Rp11,233,870,968

Rp11,233,870,968

Biaya Transportasi
Jumlah unit x biaya transportasi

Rp2,421,900,000

Total

Rp2,421,900,000

Biaya Produksi

Rp2,421,900,000
Rp145,432,770,968

Biaya Simpan
8% from full costing
Biaya Total

11,634,621,677.42Rp

Rp11,634,621,677
Rp157,067,392,645

Table 3.14 Job Cost Sheet for Inception X2 - Surabaya
PT PSIT II
JOB COST SHEET
Nomer Order :

2

Tipe :

produk :

Mobil

Jumlah unit:

date order :
Tgl

Inception X2
1485.135

Duedate:
Notifikasi

Perhitungan Biaya

Inception X2

148,513,500,000

No.dok

Biaya Tangerang

16-Nov-12
Total

Raw Materials Cost

Total

148,513,500,000

148,513,500,000

Direct Labor Cost
Jumlah jam kerja x upah
Total

17000000000
17000000000

17000000000

Factory Overhead Cost
Pre determined overhead cost

Rp11,233,870,967.74

Total

Rp11,233,870,967.74

Rp11,233,870,967.74

Biaya Transportasi
Jumlah unit x biaya transportasi

Rp3,415,810,500.00

Total

Rp3,415,810,500.00

Biaya Produksi

Rp3,415,810,500.00
180,163,181,468

Biaya Simpan
8% from full costing
Biaya Total

14413054517

14413054517
194,576,235,985

Table 3.15 Job Cost Sheet for Inception X3 - Surabaya
PT PSIT II
JOB COST SHEET
Nomer Order :

3

Tipe :

produk :

Mobil

Jumlah unit:

date order :
Tgl

Inception X3
1485.135

Duedate:
Notifikasi

Perhitungan Biaya

Inception X3

Rp145,543,230,000

No.dok

Biaya Tangerang

16-Nov-12
Total

Raw Materials Cost

Rp145,543,230,000

Rp145,543,230,000

Direct Labor Cost
Jumlah jam kerja x upah
Total

Rp16,800,000,000
Rp16,800,000,000

Rp16,800,000,000

Factory Overhead Cost
Pre determined overhead cost

Rp11,233,870,968

Total

Rp11,233,870,968

Rp11,233,870,968

Biaya Transportasi
Jumlah unit x biaya transportasi

Rp3,415,810,500

Total

Rp3,415,810,500

Biaya Produksi

Rp3,415,810,500
Rp176,992,911,468

Biaya Simpan
8% from full costing
Biaya Total

Rp14,159,432,917

14,159,432,917.42Rp
Rp191,152,344,385

3.3.6 Cost Of Production Calculation

Table 3.16 Cost of Production
Location

Product X1

Product X2

Product X3

Bantul

153,608,172

142,930,932

136,250,950

Surabaya

149,161,816

131,015,858

128,710,416

From cost of production calculation above, then the company would rather produce
the cars type X1, X2, and X3 in Surabaya, since Surabaya is proven to consume less cost
compared to Bantul. Those analyses are based on lowest cost of production pickup for each
car type in both of cities, since the smaller cost taken, the smaller cost of production that
needs to be expanded by the company.

3.3.7 Selling Price Calculation

Table 3.17 Margin and Tax Rate
TYPE

MARGIN

PAJAK

Inception X1

300%

8%

Inception X2

200%

8%

Inception X3

150%

8%

Table 3.18 Selling Price
Location

Product X1

Product X2

Product X3

Bantul

626,721,340

440,227,269

351,527,450

Surabaya

608,580,211

403,528,842

332,072,875

From the calculation of selling price in Table 3.18 above, it is better for the company
to produce cars type X1, X2, and X3 in Bantul. The analysis is based on the pickup of the
biggest selling price for each car type based on the comparison between cost analysis in
branch Bantul and Surabaya. Because, by taking the bigger price would bring the bigger profit
for the company.

3.3.8 Determining Location of the Right Order

Location determination based on Job Sheet that taken from total cost on Job Cost Sheet in
each product. Total cost is gained from formula:

Table 3.19 Location Determination
Location

Inception X1

Inception X2

Inception X3

TOTAL

Bantul

161,749,404,590 212,271,728,990 202,351,054,190 576,372,187,770

Surabaya

157,067,392,645 194,576,235,985 191,152,344,385 542,795,973,015

From above calculation that directly taken from job sheet on Table 3.19, therefore it is
better for the company to pick the production location for Product X1, X2, and X3 in
Surabaya. The most appropriate location for the production is Surabaya, this can be decided
since total cost in Surabaya is lower compared to Bantul, in which Suarabaya has Rp
542.795.973.015 while Bantul consumes Rp 576.372.187.770.

3.4 Conclusion

There are three main outputs in this practicum; those are cost of production, selling price, and
location of the right order. Within both alternatives of production branches in Bantul and
Surabaya, in the perspective of cost of production, the company is better to pick Surabaya,
since Surabaya is proven to consume less cost compared to Bantul. In term of selling price,
Bantul is proven to bring greater profit for the company. And for determining location of the
right order to manufacture Product X1, X2, and X3, it is best to choose Surabaya as the
location since it uses less money according to Job Sheet calculation.