What Can Be The Cost Unit For Cement Industry?

What Can Be The Cost Unit For Cement Industry
Must-know: The cost elements of cement Cost elements The major cost elements that are associated with the production of cement include:

Power and fuel costs Raw material costs Selling expenses Other expenses

Power and fuel The cement industry relies on power. Power and fuel costs account for ~30% of the price of cement when it’s sold. As a result, power and fuel have a major impact on the company’s operating expenditure. Coal is used to fire the kiln. Different varieties of fuel—diesel, coal, pet coke, and lignite—are used to grind the clinker in the kiln.

  • Cement plants require different amounts of power based on the heat treatment process that’s being used.
  • Energy consumption hovers around 60–70 kilowatt hours (or kWh) of power per pound of clinker produced.
  • Limestone and other raw material Article continues below advertisement The second major component in the production of cement is the cost of raw materials.

The primary raw material that’s used is limestone. Raw materials account for 30%–40% of the cost of sales. Cement plants are generally located near limestone quarries because limestone can’t be transported long distances. As a result, clinker plants are clustered around limestone deposits.

  • Apart from limestone, other raw materials used in the cement industry are fly ash, slag, and gypsum.
  • Transportation cost In the cement sector, the manufacturing facilities and end-user markets are considerable distances from each other.
  • Cement plants are located near limestone reserves.
  • As a result, cement has to travel a considerable distance to reach the end-users.

Since cement is a low-value, high-volume commodity, transporting it to the end-user accounts for a significant portion of the cost for cement manufacturers—it constitutes more than 10% of the cost of sale. There are three key modes of transportation used by the cement industry—road, rail, and ocean freight.

  1. Road and rail contribute more than 90% of the transportation.
  2. Article continues below advertisement In order to control freight costs, companies strategically locate the clinker units closer to limestone reserves.
  3. The grinding units are set up closer to consumption centers because transporting clinker is cheaper than transporting cement.

Blending material, like fly ash or slag, may not be available near the limestone reserve. Selling and other expenses Other expenses include employee costs, administration expenses, and repair and maintenance charges. These account for 15%–20% of the cost of sales.

Which cost is appropriate for cement industry?

Unit costing method is used in cement industry. Process costing is used in the industries where the production passes through various process.

What are the examples of cost units?

A unit of production for which the management of an organization wishes to collect the costs incurred. In some cases the cost unit may be the final item produced, for example a chair or a light bulb, but in other more complex products the cost unit may be a sub-assembly, for example an aircraft wing or a gear box.

What is the cost unit of automobile industry?

Explanation: It is a unit of product in relation to which costs may be ascertained or expressed. In the automobile industry, a cost unit is number of automobiles.

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What is cost Centre and cost unit?

Cost Centre and Cost Unit Even though cost centre and cost unit are two independent terms, they are intertwined and necessary for cost control in a company. A cost unit is the measurement medium whereas a cost centre refers to a subdivision, location, department, or other institution.

  • The marketing department, Research & Development department, and other cost centres are examples of cost centres.
  • Metre, kilometre, gallon, and other cost units are examples of cost units.
  • The first phase in the cost analysis process is to identify the cost centres, and the second is to assess the costs of those departments using the cost units determined by top management.

Cost centres produce profit through operational efficiency, but they do not directly contribute. The cost unit aids in the quantification of these departments’ costs. Cost centres are primarily developed to assist management in operations like budgeting, strategic planning, decision-making, and control.

Cost unit, on the other hand, serves no such purpose because it is simply a way of expressing cost. In cost techniques, two types of important activities are involved. This is the classification and collection of expenditure based on cost elements. Another is the allocation and apportionment of the expenditure for both the cost centre and cost unit.

An accountant needs to assert the cost of different objects in the system of cost accounting. The cost centre meaning is one portion of the whole organisation, to which the cost is charged. On the contrary, cost unit or unit cost refers to a unit in which cost is measured or expressed.

What is unit cost?

What Is Unit Cost? – A unit cost is a total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service. Unit costs are synonymous with cost of goods sold (COGS). This accounting measure includes all of the fixed and variable costs associated with the production of a good or service.

Which industries use unit costing?

Unit Costing – This method applies to businesses that produce a single product. In this method the total cost is divided by number of units to derive per unit cost. This is mostly used in industries dealing in- Cement manufacturing, paper manufacturing, textiles.

What is cost per unit volume?

Cost per unit of volume Let’s suppose you look at the strip of material given its length, width and height, like 254×76.2×8. You know its cost, f.e.19000.00. To be able to compare this cost to cost of another strip of different size you need to calculate cost per unit of volume. Of course, in the calculator below you can use any units, not only millimeters, as long as you enter all dimensions in the same units. Thus, if you use inches, you get cost per cubic inch, feet – cost per cubic foot and so on. Calculation precision Digits after the decimal point: 2 : Cost per unit of volume

Is unit cost total cost?

Unit Cost Meaning – Unit Cost is the total cost (fixed and variable) incurred by the company to produce, store and sell one unit of a product or service. This concept is most commonly used in the manufacturing industry and is calculated by adding fixed and variable expenses and dividing it by the total number of units produced.

What are the two types of cost units?

Types of Cost Units – Cost units can be categorized as follows: Simple Unit: These use a single standard or unit of measurement of the goods manufactured (e.g., per piece, per kilogram, per quintal, per ton, per gallon, or per meter). Composite Unit or Complex Unit: These combine two simple units (e.g., per passenger-kilometer, per ton-kilometer, or per kilowatt-hour).

  1. Number
  2. Area
  3. Volume
  4. Length
  5. Weight
  6. Time
  7. Value
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Cost units are always selected carefully based on the nature of business operations. For instance, the cost unit of steel is naturally ascertained in terms of per ton. Similarly, the cost unit of carrying a passenger by a transporter is naturally ascertained in terms of the distance traveled in kilometers. The following are examples of cost units applied in different industries:

Brick Industries Cost unit per 1000 bricks
Coal Mines Cost unit per quintal
Cotton Mills Cost unit per meter
Electric Company Cost unit per unit
Transport Companies Cost unit per kilometer
Steel Companies Cost unit per ton
Water Supply Cost unit per 1,000 liters
Furniture Industries Cost unit per number
Oil Companies Cost unit per liter
Soap Factory Cost unit per dozen, per kilogram, or per tablet

What is simple cost unit?

Cost unit, also known as the cost per unit, the cost of goods sold or the cost of sales, is the amount of money that a company invests in manufacturing a single unit of a saleable product. The cost of unit calculation appears in the company’s financial statement.

How do you find the cost per unit?

Understanding the cost of each unit you produce is essential to ensure your business remains profitable. To calculate the cost per unit, add all of your fixed costs and all of your variable costs together and then divide this by the total amount of units you produced during that time period.

What is unit cost in construction?

What Is a Unit Price Contract? – In a unit price contract, a construction company prices individual portions, or units, of work to estimate a total project cost. Each unit is based on several variables, in combination or on their own, such as materials, labor and overhead.

Why cost of cement is high?

Why prices of cement, steel have doubled Cement manufacturers have blamed the rise in cement prices on higher costs for raw materials and inputs. Speaking to the Nation, the manufacturers said the costs of raw materials continue to increase disproportionally against what they can absorb.

  • This has forced them to pass some of the cost to the market.
  • We have been forced to increase our prices because of high taxation, the cost of electricity is high, the fuel price is high, and importation of raw materials like concrete admixtures has also risen.
  • Everything is just rising,” said a representative of the Kenya Federation of Master Builders.

Concrete admixtures are natural or manufactured chemicals or additives used in concrete mixing to enhance specific properties of the fresh or hardened concrete, such as workability, durability, or early and final strength. According to the representative, cement firms are struggling to compete with counterfeit cheap cement available in the local market.

  1. The drastic increase in the price of essential products in construction like cement, iron sheets and deformed steel bars have forced many to halt their projects or dig deeper into their pockets.
  2. Many hardware stores in Eastlands, South B, Kawangware and Ngara had no cement in stock in Nairobi.
  3. Many promised to get the product later in the day but even that was impossible.

“I bought a bag of cement for Sh550 in Kawangware at the end of January. Today they sell the same cement for Sh710 in the same shop,” said James Mwangi. Mr Mwangi said he will suspend his project and wait for the prices to drop soon. “We currently do not have cement in stock but we are expecting to get it in the afternoon.

  1. Indly check with us around 2pm,” one seller in Kawangware told the Nation.
  2. Hardware shops with cement had put limits on how many bags one could purchase, making it hard for small projects looking for fewer bags of the product to continue.
  3. Linda Atieno, of Rongai, wanted to buy 10 bags of cement to finish a small project at her home.
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But every hardware store she walked into demanded that she buy at least 30 bags. “I needed cement to finish a small part of my house I was renovating, but from Monday, I have been moving around as no one wants to sell 10 bags,” she said. “According to the sellers, they don’t have the cement in stock, they have to make an order from the supplier and they can’t order just 10 bags.” In the North Rift region, cement retails for up to Sh1,000 in some parts.

Why cost of cement is high?

Why prices of cement, steel have doubled Cement manufacturers have blamed the rise in cement prices on higher costs for raw materials and inputs. Speaking to the Nation, the manufacturers said the costs of raw materials continue to increase disproportionally against what they can absorb.

  1. This has forced them to pass some of the cost to the market.
  2. We have been forced to increase our prices because of high taxation, the cost of electricity is high, the fuel price is high, and importation of raw materials like concrete admixtures has also risen.
  3. Everything is just rising,” said a representative of the Kenya Federation of Master Builders.

Concrete admixtures are natural or manufactured chemicals or additives used in concrete mixing to enhance specific properties of the fresh or hardened concrete, such as workability, durability, or early and final strength. According to the representative, cement firms are struggling to compete with counterfeit cheap cement available in the local market.

  1. The drastic increase in the price of essential products in construction like cement, iron sheets and deformed steel bars have forced many to halt their projects or dig deeper into their pockets.
  2. Many hardware stores in Eastlands, South B, Kawangware and Ngara had no cement in stock in Nairobi.
  3. Many promised to get the product later in the day but even that was impossible.

“I bought a bag of cement for Sh550 in Kawangware at the end of January. Today they sell the same cement for Sh710 in the same shop,” said James Mwangi. Mr Mwangi said he will suspend his project and wait for the prices to drop soon. “We currently do not have cement in stock but we are expecting to get it in the afternoon.

  • Indly check with us around 2pm,” one seller in Kawangware told the Nation.
  • Hardware shops with cement had put limits on how many bags one could purchase, making it hard for small projects looking for fewer bags of the product to continue.
  • Linda Atieno, of Rongai, wanted to buy 10 bags of cement to finish a small project at her home.

But every hardware store she walked into demanded that she buy at least 30 bags. “I needed cement to finish a small part of my house I was renovating, but from Monday, I have been moving around as no one wants to sell 10 bags,” she said. “According to the sellers, they don’t have the cement in stock, they have to make an order from the supplier and they can’t order just 10 bags.” In the North Rift region, cement retails for up to Sh1,000 in some parts.

How much does it cost to make cement factory?

Q. How much does it cost to start a cement company? – Ans- The first question that arises during How To Start Your Own Cement Business is its Cement Factory Cost. You’ll be required to make an initial investment anywhere between 50,000 Rupees to 5 Lakhs as a security deposition and additional requirements to the enterprise, based on the brand you choose.