Passer au contenu principal

Your internet browser is out of date and not supported by this website. For the best viewing experience on wool.com, please update your browser to one of the options below.

MMFS Manual

Chapter 1.3 Calculate your cost of production per kilogram of meat or wool

 

Chapter 1.3 Calculate your cost of production per kilogram of meat or wool

Background information

In the grazing industries, knowing your cost of production ($ spent to produce a kilogram of meat or wool) is a key piece of financial information you can use to assess your enterprise performance. Comparing your performance against other like businesses (chapter 1.4) will be more powerful if you know your costs per kilogram.

Making sense of prices and marketing (see chapter 2.3 in MMFS Module 2 Market Focused Wool Production, and chapter 3.1 in MMFS Module 3 Market Focused Lamb and Sheepmeat Production) is also much easier when you know your costs per kilogram.

Knowing your cost of production allows you to set profitable target average sale prices which assists in budgeting and planning expenditure and shows the likelihood of being able to meet your overhead costs, interest expenses and taxation liabilities. This will drive a profitable business outcome.

Analysing your cost of production will lead to a deeper financial understanding of your business. This is a high value process that can assist in a critical review of your business and boost productivity.

At a glance

  • Peter Drucker famously said, “If you can't measure it, you can't manage it.” Knowing your cost of production is essential to analyse and improve enterprise performance.
  • High cost of production is a trigger to review variable costs and your management approach. Dip deeper into your figures to identify focus areas for improvement.  

Determine your cost of production 

Calculating cost of production is an important step in analysing business performance. A specific set of tools is included with this module. These include: 

SIGNPOSTS