Application of the Variable Costing Method in Calculating Product Cost to Determine the Selling Price at Ud. Lyvia Nusa Boga

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Manado— Variable Costing Helps Indonesian Sambal Producer Set Lower and More Accurate Prices.Research conducted by Trisa Refina Arundaa, Jullie Sondakh, and Meily Kalalo from Sam Ratulangi University, published in January 2026 in the International Journal of Business and Applied Economics (IJBAE)

The research conducted by Trisa Refina Arundaa, Jullie Sondakh, and Meily shows that applying the variable costing method can reduce the calculated unit cost and help the business set more competitive selling prices—without sacrificing profit margins.

Why Production Cost Accuracy Matters

In business, pricing is more than putting a number on a label. The selling price determines whether a company can:

• cover production expenses,
• maintain sustainable profit,
• compete with similar products,
• and survive long-term market pressure.

The authors emphasize that many SMEs still struggle to clearly separate total production cost from unit product cost, which leads to pricing decisions based on habit rather than reliable data.

Even small errors in cost calculation can push the selling price too high (reducing sales) or too low (creating invisible losses).

UD. Lyvia Nusa Boga Still Uses a Traditional Costing Approach

Based on interviews and observations, UD. Lyvia Nusa Boga currently calculates production costs by including raw materials, labor, and several overhead expenses such as gas, machine depreciation, and administrative salaries.

However, the study highlights two important cost components that were not included in the company’s cost calculation:

• packaging and sticker costs,
• electricity and water costs.

The company also did not clearly separate costs into fixed and variable categories, even though this distinction is essential for determining accurate unit cost.

How the Study Was Conducted

The research was carried out directly at UD. Lyvia Nusa Boga’s production location in Perumahan Griya Paniki Indah, Manado. Data collection included observation, interviews, and documentation.

The researchers interviewed the owner/manager (Suriani) and one production employee (Mariani). The study took place from July to October 2025.

Although the research used a descriptive qualitative approach, it relied heavily on numerical production cost data, allowing the authors to compare results clearly.

Raw Materials Are the Biggest Cost Driver

The study found that weekly raw material costs were the largest expense in the production process.

For example:

• Cakalang Fufu Rica-Rica required 25 kg of skipjack tuna, with raw material costs totaling IDR 2,515,000 for 100 units.
• Sambal Roa required 7 kg of roa fish, with raw material costs totaling IDR 1,785,000 for 90 units.
• Sambal Cumi required 3 kg of squid, with raw material costs totaling IDR 875,000 for 50 units.

These figures show how sensitive food SMEs are to raw material price volatility, especially when they rely on seafood-based ingredients.

Weekly Labor Costs Are Recorded the Same Across Products

UD. Lyvia Nusa Boga employs three direct production workers. Wages are calculated daily from Monday to Saturday at IDR 95,000 per person per day.

For each product batch produced weekly, total direct labor costs were recorded as IDR 285,000.

However, the study points out a potential issue: production volumes differ across products, yet labor cost allocation was recorded in the same amount, which can distort unit cost calculations.

Variable Costing Produces Lower Unit Costs

The key contribution of this research lies in its comparison between the company’s traditional calculation method and the variable costing method.

Under the company’s current approach, unit product costs were calculated as:

• Cakalang Fufu Rica-Rica: IDR 35,400
• Sambal Roa: IDR 31,222
• Sambal Cumi: IDR 38,000

When the authors recalculated using variable costing (including variable raw materials, direct labor, packaging, gas, and electricity-water costs allocated based on machine usage), the unit costs dropped significantly:

• Cakalang Fufu Rica-Rica: IDR 31,483
• Sambal Roa: IDR 26,537
• Sambal Cumi: IDR 27,124

The largest gap was found in Sambal Cumi, where the unit cost decreased by IDR 10,876 per unit compared to the company’s method.

Recommended Selling Prices Become More Competitive

UD. Lyvia Nusa Boga currently sells its products at:

• Cakalang Fufu Rica-Rica: IDR 45,000
• Sambal Roa: IDR 39,000
• Sambal Cumi: IDR 38,000

The company applies a profit markup of 35%. When the same 35% markup is applied to the variable costing unit costs, the recommended selling prices become:

• Cakalang Fufu Rica-Rica: IDR 42,502
• Sambal Roa: IDR 35,825
• Sambal Cumi: IDR 36,617

This means the business could offer lower prices and still achieve the desired profit margin.

Why This Matters for SMEs and Indonesia’s Food Industry

This study delivers a practical message for SMEs, especially in the food and beverage sector.

If SMEs rely on traditional costing without proper cost classification:

• unit costs can be inflated,
• selling prices become less competitive,
• and business decisions are made based on assumptions rather than data.

Variable costing offers a clearer approach by focusing on costs that actually change with production volume. This helps businesses:

• control daily operational costs,
• improve pricing strategy,
• make faster production decisions,
• and stay competitive in a market where raw material prices and consumer preferences change rapidly.

Author Profiles

• ·                     Trisa Refina Arundaa -  Universitas Sam Ratulangi
• ·                     Jullie Sondakh - Universitas Sam Ratulangi
• ·                     Meily Kalalo - Universitas Sam Ratulangi

Research Source

Arundaa, T. R., Sondakh, J., & Kalalo, M. (2026). Application of the Variable Costing Method in Calculating Product Cost to Determine the Selling Price at UD. Lyvia Nusa Boga.
International Journal of Business and Applied Economics (IJBAE), Vol. 5 No. 1, Januari 2026, hlm. 305–324.
DOI:https://doi.org/10.55927/ijbae.v5i1.574                                                                                          Official URL: https://nblformosapublisher.org/index.php/ijbae