Final answer:
Material cost as a proportion of the total cost can be as high as 16.3% for natural resources, construction, and maintenance, and 13.7% for production, transportation, and material moving industries. The global market and uncontrollable factors such as the price of petroleum for chemical companies or coffee for coffee shops play crucial roles in determining production costs. The improvement of percent yield is vital in manufacturing to reduce waste and expenses.
Step-by-step explanation:
The cost of raw materials has been a major concern for top management, given its significant impact on cost of production. Over time, this cost as a percentage of the total cost for the end product has increased substantially. In specific industries, such as natural resources, construction, and maintenance, this percentage can be as high as 16.3%. Similarly, sectors involving production, transportation, and material moving see material costs comprising 13.7% of the total cost. Understanding these figures is critical for businesses, not only to manage expenses but also to navigate challenges like pricing control and market competition influenced by variables such as the price elasticity of demand.
Adding to the complexity is the global nature of raw material markets where factors like petroleum prices for chemical companies and coffee prices for coffee shops are uncontrollable, yet drastically affect production costs. These costs sometimes have to be passed on to the consumer, or alternatively, savings from production efficiencies might be shared with consumers depending on the market dynamics. The strive for a better percent yield in manufacturing, especially in chemical production, is a key strategy to reduce waste and cost.