Methods of accounting for production costs

In accordance with what products are produced at a particular firm, what are its volumes and technical characteristics of complexity, depending on the degree of complexity of production and technological processes, some methods of accounting for production costs are used. In modern analytical practice, the most frequently used in enterprises are the following.

Simple, or, as it is still called in the literature, a one-way method is used in those types of production activities where there is no complete work in progress or its share is negligible. Examples of such industries and enterprises may be those that are engaged in coal mining.

The essence of this method is the following: the cost of production is calculated by dividing all the total costs by the physical quantities of the products produced.

Practical methods of accounting for production costs include the order method. It is most often used in heavy engineering enterprises, because the object of accounting is one separate order, and such enterprises are classified as small-scale ones. The method is also quite common in the analysis of experimental design work, the production of which is of a single nature. When using this method to calculate the actual cost price orders should provide for the amount that is planned by the production plan for a month. And when manufacturing large aggregates, orders can be formed for the production of their individual units. Unlike what other methods of accounting for production costs suggest, with this method, indirect costs should correspond to the distribution base established at the enterprise. The main feature of it is to determine the cost of the fact of fulfilling the order by dividing the cost by the value of the production order fulfilled (in production units).

The conventional method is used, as a rule, at light and food industry enterprises, for example, in the production of sausage products. There are two main types of cost accounting - semi-finished and semi-finished. When using the first, the production of each production cycle is, by and large, a semi-finished product for the subsequent one, and therefore can be used as an end product even before the production cycle is completed. With this technique, the cost of semi-finished products, as suggested by the methods of accounting for production costs, is reflected in a special article.

The normative method takes into account that the formation of costs for the production of products in large-scale production enterprises is significantly different from those considered above, and therefore the accounting procedure here also has its differences. First, this method is most effective for manufacturing enterprises, where there is a large-scale production (for example - furniture industry). And secondly, the analysis of the cost estimate for production should be of the nature of monitoring, a constant accounting for the dynamics of deviations from the cost norms adopted at the enterprise.

A distinctive feature is that it is necessary to differentiate actual costs, and those that are defined by established norms. This is justified by the fact that any change in norms inevitably entails a change in the magnitude of the costs.

At the same time, the normative method has some limitations, which can be attributed to its shortcomings. So, if the general economic situation is unstable, then naturally, about any innovations and introduction of advanced technologies and speech can not be. Consequently, there are no grounds for applying an effective regulatory method either.

As you can see, any of the methods considered has its own analytical approaches to the accounting of production and ways of allocating costs. The totality of these methods in the analysis is supplemented also with the evaluation of the work in progress.