Application of Full Costing Method in Determining Production Cost and Selling Price (Case Study at UD. Anyen Pia)

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FORMOSA NEWS - Manado - Accurate Costing Leads to Smarter Pricing for Local Food Businesses. A new study published in July 2026 demonstrates how modern accounting practices can significantly improve the competitiveness and pricing strategies of small and medium-sized enterprises (SMEs). Conducted by Syalommita B.M. Ratu, Victorina Z. Tirayoh, and Fanda D.P. Rundengan from Universitas Sam Ratulangi in Indonesia, the research analyzed the financial practices of UD. Anyen Pia, a regional food manufacturer in Minahasa, North Sulawesi. The authors found that transitioning from traditional, informal cost estimation to a structured "full costing" methodology can lower calculated production costs by nearly 18%, opening up opportunities for strategic price reductions.

The Strategic Pricing Challenge for Small Enterprises
Small and medium-sized enterprises often struggle to survive in highly competitive markets due to informal financial management. Many small businesses determine their Cost of Goods Sold (COGS) and subsequent selling prices based on approximate calculations or prevailing market trends rather than precise mathematical data. Incorrect pricing poses a double risk:

• Setting prices too high alienates potential customers and reduces sales volume.
  
• Setting prices too low based on underestimated costs erodes profit margins, threatening long-term business survival.
  

For local manufacturers like UD. Anyen Pia which has produced traditional kue pia (bakery pastries) for approximately ten years maintaining financial clarity is vital. The business distributes its goods widely to local restaurants and food stalls. However, its traditional reliance on estimate-based pricing, without formal cost accounting, has historically obscured its true profit margins.

Simplifying the Research Methodology
The research team employed a qualitative case study research design to examine the financial operations of UD. Anyen Pia in Pineleng, Minahasa. Data collection took place over several months starting in March 2025, utilizing primary and secondary data sources. The researchers conducted in-depth interviews with the business owner, observed daily production workflows, and reviewed internal records. The mathematical analysis focused on comparing two distinct accounting approaches:

• The Traditional Business Method: The existing informal approach used by the owner, which merged operational distribution costs directly into the production cost calculations.
  
• The Full Costing Method: A structured accounting framework that aggregates all direct production costs such as raw ingredients (flour, cooking oil, sugar, cheese, and chocolate) and direct labor alongside both fixed and variable factory overheads (electricity, equipment depreciation, and cooking gas).
  

Under this systematic accounting framework, non-production costs such as delivery driver wages, sales agent commissions, and vehicle fuel were appropriately excluded from the production-specific COGS calculations.

Key Findings: Shorter Paths to Lower Costs
The comparative analysis revealed significant differences in cost allocation and final pricing:

• Lower Cost of Goods Sold: The application of the full costing method calculated a monthly production cost of Rp 49,122,000, compared to the company’s traditional calculation of Rp 59,784,000. This represents an 17.83% reduction in calculated COGS, resulting in a cost of Rp 400 per pastry instead of the owner's estimated Rp 500.
  
• Overhead and Expense Realignment: The difference of Rp 10,662,000 stems from improper expense classification. The traditional method incorrectly bundled distribution expenses (sales staff, drivers, and fuel) into the direct manufacturing costs. Conversely, the full costing method correctly isolated these as operational expenses, while explicitly accounting for overlooked fixed overheads like oven depreciation (calculated at Rp 22,500 monthly).
  
• More Competitive Market Pricing: Applying a standard 60% profit margin via the "cost-plus pricing" model yielded a recommended selling price of Rp 700 per unit. This is 12.5% lower than the business's current retail price of Rp 800.
  

While the actual monthly profit is slightly higher under the current pricing structure (Rp 36,216,000 versus Rp 34,878,000 under full costing), adopting the lower, systematically calculated price of Rp 700 provides a powerful strategic alternative.

Implications and Real-World Impact
For the broader SME sector, this study highlights that accurate cost accounting is not merely an administrative chore, but a powerful tool for strategic positioning. Adopting systematic financial calculations yields several real-world benefits:

• Enhanced Market Competitiveness: Lowering the retail price of a consumer staple like kue pia by 12.5% can attract price-sensitive customers, drive higher sales volumes, and increase overall market share.
  
• Accurate Financial Reporting: Properly distinguishing between manufacturing costs and operational/distribution expenses helps business owners identify exactly where their capital is being spent.
  
• Informed Decision Making: Clear financial metrics allow small businesses to negotiate better deals with suppliers and confidently evaluate expansion plans.
  

Author Profiles
Syalommita B.M. Ratu, SE: Graduate of the accounting program at the Faculty of Economics and Business, Universitas Sam Ratulangi, specializing in cost management and SME financial systems.
Dr. Victorina Z. Tirayoh, SE, MSA, Ak: Lecturer and senior academic researcher in the Department of Accounting at Universitas Sam Ratulangi, with expertise in management accounting and financial reporting.
Fanda D.P. Rundengan, SE, M.Si: Academic researcher and lecturer at Universitas Sam Ratulangi, focusing on accounting information systems and corporate finance.

Source
Syalommita B.M. Ratu, Victorina Z. Tirayoh, dan Fanda D.P. Rundengan. Application of Full Costing Method in Determining Production Cost and Selling Price (Case Study at UD. Anyen Pia) / Penerapan Metode Full Costing dalam Penentuan Harga Pokok Produksi dan Harga Jual (Studi Kasus pada UD. Anyen Pia). Formosa Journal of Applied Sciences (FJAS). Vol. 5, No. 7, Tahun 2026 (Halaman 1437-1452)
DOI : https://doi.org/10.55927/fjas.v4i11.74
URL: https://journalfjas.my.id/index.php/fjas