The production cost is the total cost of manufacturing items or providing services, including all intended and unintended expenses. It can be expressed in the following equation:

**Production Cost = Direct Labor Cost + Direct Material Cost + Indirect Material Cost + Indirect Labor Cost + Other Overhead Cost**

If

**Manufacturing Overhead Cost = Indirect Material Cost + Indirect Labor Cost + Other Overhead Cost**

Then

**Production Cost = Direct Labor Cost + Direct Material Cost + ****Manufacturing Overhead Cost**

To calculate production cost we will use the following dataset, containing *Direct Labor Cost*, *Direct Material Cost*, *Indirect Material Cost*, *Indirect Labor Cost*, and *Other Overhead Costs*.

**Method 1 – Insert Simple Formula to Compute Production Cost**

As the formula for production cost is a simple addition operation, we can use a simple formula to calculate it.

**STEPS:**

To simplify the formula, we will find the manufacturing cost first.

- Select cell
**C11**. - Enter the following formula:

`=C7+C8+C9`

- Then, press
**Enter**.

- To calculate the production cost, enter the following formula into cell
**C13**:

`=C5+C6+C11`

- Press
**Enter**on your keyboard.

- Alternatively, simply use the following formula:

`=C5+C6+C7+C8+C9`

- Press
**Enter**to complete the process.

The result is returned, and the formula is visible in the formula bar.

**Method 2 – Derive the Production Cost Using the SUM Function**

**The SUM function** is used to sum a set of values.

**STEPS:**

We will again calculate the manufacturing cost first to simplify the formula.

- In cell
**C11**, enter the following formula:

`=SUM(C7,C8,C9)`

- Press the
**Enter**key on your keyboard.

- In cell
**C13**, enter the following formula:

`=SUM(C5,C6,C11)`

- Press
**Enter**.

- Alternatively, just use the formula below:

`=SUM(C5,C6,C7,C8,C9)`

- Press
**Enter**to finish the procedure and view the result in the formula bar.

### Method 3 – Apply User Defined Function to Calculate Production Cost Using VBA

To calculate the production cost using a user-defined function made with VBA code, we’ll use the following simplified dataset, containing the costs for direct labor, direct material, and manufacturing cost.

**STEPS:**

- Go to the
**Developer**tab on the ribbon. - From the
**Code**category, click on**Visual Basic**to open the**Visual Basic Editor**.

- Alternatively, to open the
**Visual Basic Editor**press**Alt + F11**or right-click on your worksheet and go to**View Code**.

The **Visual Basic Editor **opens.

- Click on
**Module**from the**Insert**drop-down menu bar.

A **Module **box opens.

- Into it, copy and paste the following
**VBA**code:

**VBA Code:**

```
Function ProductionCost(dl As Double, dm As Double, mc As Double) As Variant
ProductionCost = (dl + dm + mc)
End Function
```

- Next, save the code by pressing
**Ctrl + S**.

The code creates a function named *ProductionCost*, where **dl** is the *Direct Labor Cost*, **dm** is the *Direct Material Cost*, and **mc **is *Overhead Costs on Manufacturing*.

- Go back to the worksheet.
- Select cell
**C9**, the cell where we want the production cost result to appear. - Enter the following formula using the function that we just created:

`=ProductionCost(C5,C6,C7)`

- Press
**Enter**. - The result displays in cell
**C9**, and the user-defined formula will show in the formula bar.

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