# Cara Hitung HPP

>Hello Sohib EditorOnline, in this article we will discuss a topic that is quite important for businesses of all sizes, i.e. cara hitung HPP. HPP stands for Harga Pokok Produksi which refers to the total cost of producing a product, and its calculation is crucial in determining the selling price and profitability of a business. In this article, we will guide you through the basic principles of calculating HPP and provide practical tips for its implementation in your business. Let’s get started!

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## What is HPP and Why is it Important?

Before we dive into the calculation process, it is important to understand the concept of HPP and why it is crucial for business profitability. HPP refers to the total cost of producing a product, which includes direct costs such as raw materials, labor, and overhead costs such as utilities, rent, and depreciation. The calculation of HPP enables businesses to determine the minimum selling price at which they can cover their costs and generate profits. In other words, the selling price of a product should exceed its HPP in order for a business to be profitable. Now, let’s move on to the calculation process.

### Direct Costs

The first step in calculating HPP is to determine the direct costs of producing a product. Direct costs are those costs that can be specifically attributed to the product and include raw materials, labor, and packaging costs. To calculate the direct costs, we need to follow these steps:

1. List down all the raw materials needed to produce the product, along with their prices and quantities.
2. Multiply the price and quantity of each raw material to obtain its total cost.
3. Add up the total cost of all raw materials to obtain the total direct material cost.
4. Calculate the labor cost by multiplying the number of labor hours needed to produce the product with the hourly wage rate.
5. Add up the labor cost with the direct material cost to obtain the total direct cost.
6. Include any other direct cost such as packaging cost to obtain the final direct cost.

Let’s illustrate this with an example. Suppose a manufacturing company produces a widget that requires two raw materials, material A and material B. Material A costs 10,000 IDR per unit and requires 4 units to produce one widget, while material B costs 5,000 IDR per unit and requires 6 units to produce one widget. The company also hires two workers who work for 8 hours each, with an hourly wage rate of 20,000 IDR. The packaging cost is 2,000 IDR per widget. The direct cost of producing one widget can be calculated as follows:

Raw Material Price per unit Quantity per widget Total cost
Material A 10,000 IDR 4 40,000 IDR
Material B 5,000 IDR 6 30,000 IDR
Total Direct Material Cost 70,000 IDR
Labor 2 workers x 8 hours x 20,000 IDR 320,000 IDR
Total Direct Cost 390,000 IDR
Packaging 2,000 IDR
Total Direct Cost (including packaging) 392,000 IDR

So, the direct cost of producing one widget is 392,000 IDR. This is just the first step in calculating HPP. We need to also take into account the overhead costs.

Overhead costs refer to the indirect costs of producing a product that cannot be directly attributed to it, but are necessary for the production process. These include utility bills, rent, maintenance costs, and depreciation of assets. Calculating the overhead costs is a bit more complex than the direct costs calculation, but we can simplify it by using the following formula:

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Overhead costs per widget = (Total overhead costs / Total number of widgets produced) + Direct material cost per widget x Overhead cost rate as a percentage

The overhead cost rate as a percentage is determined by dividing the total overhead costs by the total direct material cost for a certain period, usually a year. The formula above enables us to allocate the overhead costs to each widget produced based on the direct material cost. Let’s see how this works in practice.

### Example Calculation

Suppose the manufacturing company from the previous example has the following overhead costs for the year:

• Utility bills: 2,000,000 IDR
• Rent: 5,000,000 IDR
• Maintenance: 1,000,000 IDR
• Depreciation: 3,000,000 IDR
• Total overhead costs: 11,000,000 IDR
• Total direct material cost for the year: 10,000,000 IDR
• Total number of widgets produced for the year: 1,000 widgets

The overhead cost rate as a percentage is calculated as follows:

Overhead cost rate = Total overhead costs / Total direct material cost x 100%

Overhead cost rate = 11,000,000 IDR / 10,000,000 IDR x 100% = 110%

This means that the overhead costs are 110% of the direct material costs for the year. Now, we can calculate the overhead costs per widget using the formula above, as follows:

Overhead costs per widget = (11,000,000 IDR / 1,000 widgets) + 70,000 IDR x 110% = 11,000 IDR + 77,000 IDR = 88,000 IDR

So, the overhead costs per widget are 88,000 IDR. Now, we can add this to the direct cost per widget to obtain the HPP.

### Final Calculation

The final step in calculating HPP is to add up the direct cost per widget with the overhead cost per widget to obtain the HPP per widget. The selling price of the widget should exceed this amount in order for the business to be profitable. In our example, the direct cost per widget was 392,000 IDR and the overhead cost per widget was 88,000 IDR, so the HPP per widget is:

HPP per widget = Direct cost per widget + Overhead cost per widget = 392,000 IDR + 88,000 IDR = 480,000 IDR

This means that the minimum selling price of the widget should be 480,000 IDR in order for the business to be profitable. Of course, businesses should also consider market demand and competition when setting the selling price, but the HPP calculation provides a solid foundation for pricing decisions.

## FAQs

### 1. What is the difference between HPP and COGS?

HPP refers to the total cost of producing a product, while COGS (Cost of Goods Sold) refers to the cost of producing and selling a product. COGS includes the HPP as well as other costs such as shipping, distribution, and marketing expenses. HPP is a crucial component of COGS and should be accurately calculated in order for businesses to determine their profitability.

### 2. Can HPP be used for service-based businesses?

HPP is primarily used for businesses that produce physical goods, but service-based businesses can also benefit from calculating their HPP. In this case, HPP would refer to the total cost of providing the service, which includes labor, materials, and overhead costs. By calculating the HPP, service-based businesses can determine the minimum price they should charge in order to cover their costs and generate profits.

### 3. How often should businesses recalculate their HPP?

Businesses should recalculate their HPP periodically, especially if there are significant changes in the cost of raw materials or overhead expenses. The frequency of recalculations depends on the industry and business size, but a good rule of thumb is to recalculate HPP at least once a year.

### 4. How can businesses reduce their HPP?

Businesses can reduce their HPP by implementing cost-saving measures such as finding cheaper suppliers, optimizing production processes, and reducing waste. However, businesses should also consider the quality of their products and services, as cutting costs too much may result in lower quality and customer satisfaction.

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### 5. Is it possible for the selling price to be lower than the HPP?

Technically, businesses can sell their products at a price lower than the HPP, but this would result in losses and is not sustainable in the long run. In some cases, businesses may use promotional pricing or discounts to attract customers, but they should always make sure that the selling price covers at least the HPP, if not more.