Understanding Analysis of Production Cost Calculation, Determining Sell Price, and Financial Literation of Industrial Businesses Continuity in Micro, Small and Medium Enterprise (MSME) in City of Pekanbaru

Abstract

A micro, small and medium enterprise (MSME) becomes a special attention of the government to increase Indonesian economic sector. The development of MSME and creative economy will create a new economic resource and support regional economic development to provide a job, and MSME has high economic resilience too. In a practice, some problems often occur in cost-production calculation, the determining of sell price, and financial literacy that cause an error in calculating profit, so a business actor is wrong in analyzing the financial condition of the MSME. That condition encourages low business growth and even bankruptcy of MSME due to not being able to compete or experiencing acute Financial Distress. The development of the number of small sub-district industries in Pekanbaru City has decreased significantly by 53%. The number of small industries in 2016 amounted to 117 decreased to 54 units in 2017. Such a situation makes it necessary to pay special attention to understanding the calculation of production costs, determining selling prices and financial literacy among MSME sector players.The research method conducted here is a Qualitative method using a case study strategy in analyzing and applying it. The result of this study shows the lack of understanding of welding workshop owners related to the calculation of production costs, determining the selling price and financial literacy will have an impact on business continuity. This error – in analyzing costs and selling prices – causes it to be one of the factors of loss or inability to reach the break-even point of production, resulting in a loss and the inability of the company to remain competitive.

Keywords: Production Costs, Selling Prices, Financial Literacy, Business Continuity

DOI: 10.7176/RJFA/11-6-09

Publication date:March 31^st 2020