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raw material price changes are a reality for all manufacturing companies and cost managers are charged with making sure that product costs which serve as the basis for pricing decisions are accurately calculated in this example lets imagine that you work for a food company that produces frozen meals for sale at grocery and discount stores as you can imagine there are a number of inputs or raw material components that are assembled to create the meal for the sake of simplicity lets focus on the three main components for this chicken meal chicken rice and aluminum packaging the recipe identifies the amount of each component required to make the meal multiply the amount by the cost per unit and you can calculate the cost associated with each raw material input adding them together the three main components have a total cost of three dollars and 34 cents bringing that cost forward will make an assumption that the cost of additional components like seasoning for example at another 75 cent