If you are in a manufacturing business, your company will have manufacturing costs. These costs appear on your company’s general ledger and are eventually transferred to the company’s income statement. If part of your manufacturing process requires a factory, the total square footage of your factory will help you determine your manufacturing costs per square foot. Shrinking your manufacturing costs per square foot will save your business money and make it more efficient.
Determine your manufacturing costs during the year. Your accountant will record these amounts in your general ledger and on your income statement. The costs include items such as factory overhead, wages for manufacturing workers and cost of goods produced. For example, assume your company paid PKR 500,000 in manufacturing costs.
Determine the total square footage of your factory. The square footage should be given in your purchase invoice for the factory or from blueprints used to construct the factory building. In the example, assume you have 25,000 square feet of factory space.
Divide your manufacturing costs by the total square footage of your facility. In the example, 500000/25000 = 20. Your manufacturing costs are PKR 20.00 per square foot.
Source: Carter Mcbride