How to add the cost of rent of premises to products prices.

[Etini]

One of the cost components that is often overlooked and omitted when calculating the price to sell a product is always the amount spent on rental of the business premises. Maybe, this is majorly because most enterpreneurs don't know how to calculate the ideal cost per unit incurred to rent a space for production.

To know how much you should add as a cost component from rent to the price of a product, you would need to know the total volume of products made during the period that the rent runs. You would have to divide the amount you pay as rent for the business premises by the total number of products done within that period.

For instance, a business that produces 1000 units of it's products within one month has a rent of $1000 a month. The rental cost to be added to the prices of products would be

$1000/1000 units which equals $1.

That means the business should add $1 per product to cover up for the rents.

 

[Suba]

Grouping costs must be in accordance with general accounting principles, so as not to mislead readers such as investors and the tax office. To classify rental costs, whether it is factory building rental, office rental, or shop rental. Office and shop rentals must be grouped into operational costs, so they do not affect the cost of goods sold. Meanwhile, rent for factory buildings is grouped into factory overhead costs which will later affect production costs. Factory rental costs also include fixed factory overhead costs, so that during holidays or when the factory is not carrying out production activities the costs will remain fixed and must be paid.