The cost refers to the amount spent on a purchase, while the original cost (or cost price) refers to either the cost incurred for the goods sold (cost of sales) or the cost incurred to produce a product (manufacturing cost). In contrast, incurred cost refers to the total expenses invested in making a product, including costs that don\u2019t fully become part of the original cost. Items that are larger than raw materials but less than a finished product are considered work-in-progress (WIP).
\n <\/p>\n
Today, at the Food Hall in the nearby Summarecon Mall, I bought a pack of eggs (10 pieces) for Rp.26,000 and a box of Indomie (40 pieces) for Rp.100,000. So, the total amount I paid for today\u2019s shopping was Rp.126,000. For example, if I opened a stall selling egg Indomie for my neighbors and sold one serving right after opening, the original cost would be Indomie Rp.2,500 + egg Rp.2,600 = Rp.5,100.
\nIn other words, the “original” in original cost has the same meaning as “base,” so the original cost is the base amount of Rp.5,100 for one serving of egg Indomie sold. This is separate from the purchase amount of Rp.126,000, yet both are referred to as costs (purchase cost and input cost), which can easily lead to confusion. <\/p>\n
If the “base” is a manufactured (cooked) product (one serving of egg Indomie), it\u2019s called the manufacturing cost. If it\u2019s a product recorded as sold (since what\u2019s cooked always becomes sales, also one serving of egg Indomie), it\u2019s called the cost of sales. However, for the second customer who just walked in, the Indomie (1 packet) and egg (1 piece) being prepared for their second serving are in a state of “larger than raw materials but less than a finished product.” There\u2019s no base object to call it an original cost for yet, but if we had to categorize it, it would be the original cost of work-in-progress.
\nOnce the stall gets busy, it becomes hard to track how many Indomie packets and eggs were used in a day. Normally, you\u2019d calculate the input cost by adding the cost of yesterday\u2019s leftover Indomie and eggs (from the morning) to today\u2019s purchase cost, then subtracting the cost of what\u2019s left after closing. <\/p>\n
In the case of a stall, once cooking starts, there\u2019s no such thing as carrying over half-cooked items to the next day. The costs invested in cooking always become a product and thus a cost against sales. Therefore, “incurred cost = manufacturing cost = cost of sales,” meaning concepts like incurred cost or manufacturing cost aren\u2019t even necessary. The cost of sales is finalized once the remaining Indomie and egg amounts are determined after closing.<\/p>\n
Materials refer to the Indomie and eggs bought from the Food Hall and still stored on the shelf. A product is the egg Indomie fully cooked according to a set recipe. Anything in between\u2014”larger than materials but less than a product”\u2014is collectively called work-in-progress. So, the noodles waiting to be softened in the pot are work-in-progress, and the state after adding the egg and waiting for it to set is also work-in-progress.
\nWhen calculating the amounts at closing\u2014materials (Indomie and eggs), work-in-progress (what\u2019s in the pot being cooked), and products (egg Indomie)\u2014the work-in-progress amount is naturally 0. However, the input cost (incurred cost) includes 2 packets of Indomie and 2 eggs, which directly becomes the cost of sales.
\nI often get confused myself, but incurred cost refers to the total expenses invested in making a product, including the portion that didn\u2019t fully become part of the original cost, categorized as direct material costs. From this, only the portion that becomes a finished product is included in the manufacturing cost, while anything that happens to not be a finished product at a given moment is called work-in-progress.
\nSo far, I\u2019ve tried to explain the difference between cost and original cost, the meaning of work-in-progress, and the difference between incurred cost and work-in-progress using egg Indomie as an example. However, original cost also includes utilities and labor costs beyond materials. Since I cook it myself, there\u2019s no labor cost, but utility costs are finalized when the bill arrives at the beginning of the next month. Dividing that by the number of operating days gives the daily utility cost.
\nIf the “base” is the cost for a one-month period, it\u2019s sometimes called a period cost, meaning it\u2019s confirmed as an original cost the moment it\u2019s incurred as an expense.<\/p>\n","protected":false},"excerpt":{"rendered":"
The cost refers to the amount spent on a purchase, while the original cost (or cost price) refers to either the cost incurred for the goods sold (cost of sales) or the cost incurred to produce a product (manufacturing cost). In contrast, incurred cost refers to the total expenses invested in making a product, including costs that don\u2019t fully become part of the original cost. Items that are larger than raw materials but less than a finished product are considered work-in-progress (WIP).<\/p>\n","protected":false},"author":2,"featured_media":73882,"parent":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[624],"tags":[],"class_list":["post-94497","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cost-management"],"_links":{"self":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/94497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/comments?post=94497"}],"version-history":[{"count":0,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/94497\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media\/73882"}],"wp:attachment":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media?parent=94497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/categories?post=94497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/tags?post=94497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}