There are at least six different things to get right if you want to properly calculate the costs of producing aggregates, and you may be doing one or more of these wrong. What are they, and how does it work?
But … you have to be honest with yourself about the way you capture every single production cost if you really want to manage your aggregates business properly.
Here’s how to be sure that you are getting it right.
The first rule is that production costs must be captured in real time, every time, instead of reporting costs in ‘favourable’ periods. Practices such as declaring this year’s accrued annual maintenance costs next year, or spreading seasonal subcontracting costs across the year to avoid monthly fluctuations, will eventually get in the way of understanding actual production costs during the period in question.
And there are more, such as classifying production costs; fixed, variable, depreciation, salaries, maintenance, benefits and third party services. Production costs must also be allocated to the activity or process that generated them and the list goes on.
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