Cost Accounting is an essential tool to reflect the results of the company's management. This contribution is efficient by achieving the provision of detailed information on the behavior of costs, allowing decision-making with the aim of reducing production costs and increasing sales volume.
For the knowledge and control of costs, it is necessary to develop a modeling that is not limited to methodologies that allow the planning, calculation and analysis of costs, but rather leads to the implementation of unique bases and principles that, once applied according to the specifications of the production and the organization of the productive process of each company constitute an effective instrument for the management of this.
The company does not know the real cost of the productions, as well as the unitary contribution that these exert on the expenses of operations and consequently in the utility of the same. The existence of this fact causes the entity not to know the real unit cost of each production, which implies a lack of control of the resources and expenses allocated to the process.
cost accountingThis leads us to raise the problem that the entity does not have the necessary data and elements to provide it with the necessary and timely information about costs and their corresponding analyzes.
Taking into account the specific characteristics of the company and with the intention of solving the problem posed, our objective is to design a modeling capable of reflecting and controlling expenses for elements incurred in the production process, control accounts, profits, historical records and solve the planning needs for the purposes of determining the real cost of production. Based on the hypothesis that if the modeling of the cost of orders sheet and the models attached to it cover the information needs, then the company will be able to control its costs and make timely decisions about production and sales.
To carry out this work, it was necessary to use highly useful techniques and tools to obtain and process information such as: document review, direct observation, teamwork interviews, brainstorming, Microsoft Exel, Microsoft Word, etc..
Its importance lies in the fact that properly structured modeling can create a solid basis for the comprehensive analysis of the company's work, guaranteeing systematic control, allowing the cost behavior of the different economic periods to be objectively determined and subsequently with March of the same can be refined and adapted to all the activities that take place in the entity.
Importance of production cost.
The cost of production is an important generalizing index of the efficiency of the company, it shows how much it costs the production of certain items or the provision of certain services. The cost reflects the level of labor productivity, the technical level, the degree of efficiency of Tangible Fixed Assets, as well as the saving of material, labor and financial resources.
The determination of the real cost of production is of great importance for the Economic Directorate, which allows determining the expenses of the activity and the profit of the company, evaluating and calculating inventories of production in process and finished production, establishing or demonstrating price lists., plan according to the level of activity foreseen in the indicators for a period of operations, control the inputs in the production process and make decisions for new production and sales alternatives.
Taking production as a fundamental aspect, cost analysis is of great importance because:
- It expresses to a considerable extent the results of all the productive and economic activity of the company. It forms the price base. It is a determining element of the magnitude of profit and the level of profitability of production. The systematic reduction of the cost of production is one of the sources of socialist accumulation on whose level we depend rates of expansion of socialist reproduction and the subsequent elevation of the material and cultural level of life of the population.
There are multiple ways to reduce production costs by correctly applying the ways that we will mention below, together with a conscious attitude of each worker, we can stimulate the constant success of the company's activity:
- Optimal use of the working day. Increase in the productivity of work. Standardization and control of consumption. Optimal use of material resources. Elimination of unproductive expenses that arise as a result of the violation of the discipline of work and of the inputs used in the productive process.
Cost systems.
Cost systems are made up of standards, daily models and administrative reports integrated into a series of procedures that govern the planning, determination and analysis of costs, as well as the process of recording expenses in such a way that unit costs can be Quickly determined and used when making management decisions.
A cost system is used to quantitatively control production-related operations to report on them in a timely and accessible manner.
The importance is given in that it allows guaranteeing the information requirements for a correct direction in the company. A cost system must control the need for the information that will be obtained from it to be of real use. This well designed will offer the assurance that the information provided will be an effective means for decision making.
Objectives of the cost system.
Among the fundamental objectives for the development of a cost system are:
- Obtaining a real cost. Collection of real expenses by area. Preparation of cost sheets for products or services provided. Analysis of cost deviations.
The fulfillment of each of the stated objectives, must create the necessary conditions for the next step in order to achieve it.
Types of cost systems.
In order to calculate the cost of the units produced or the service provided, it is necessary to define a system to apply them to the activity. In general, two cost accounting systems can be applied depending on the nature of the production activities:
- Cost per process system.Cost system for work orders.
Cost per Process System:
It is applied in companies or in continuous or mass processing industries, where equal units are produced subject to the same production processes. It constitutes an average cost, where each physical unit of production is assigned an aliquot of the whole that represents the cost of production.
Cost System for Work Orders:
It is the set of principles procedures for recording the expenses identified with specific production orders, which allows finding a unit cost for each order and determining the different cost levels in relation to total production, in the companies where production is made by request.
Taking into account the characteristics of the company under study, we will delve into the cost-per-order system.
The work order cost system is especially appropriate when production depends on special jobs or processes, where products or services differ in terms of materials and conversion needs, while the product is manufactured according to specifications. of the client and the process with which it is quoted is closely linked to the estimated cost. The cost included in the manufacture of a specific order must therefore be assigned to the items produced or the service provided.
It is an elementary system and in turn of possible practical application, the objectives that differentiate it from other cost systems are:
- Determination of the sales price per production order. Calculation of the cost at the production order level. Valuation of inventories, especially of production in progress by unfinished order.
Methodology for the elaboration of the modeling.
This modeling has been designed for those companies in which their production requires a cost-per-work order method, since their activity is carried out by specific orders or batches of items requested by customers.
By this method, the inputs of materials, wages and other expenses are accumulated for each work order, so all the primary information related to it must carry its identification and the real cost of the products is determined once the order.
It is impossible to develop a model for a company without first evaluating three aspects of great importance:
- The measures that must be adopted in order to achieve the objectives of the cost system are:
Organizational aspects: develop an organization plan for the different areas for the preparation and implementation of the consumer regulatory bases for the resources that require it.
Methodological aspects: establishment of an adequate inventory control system for the recording and analysis of material costs, establishment of a method of controlling indirect costs and the time worked, preparation of methodological and specific standards for planning and control. maintenance work.
Aspects related to the operation of the system:
- Organization of the flow of information to be supplied to the cost area. Preparation of expense budgets. Determination of actual expense reports compared to approved budgets and analysis of variations.
- Aspects to be defined prior to the elaboration of the system:
- Technically analyze the technological flow of the production process and the characteristics of the productions to be carried out to decide the areas of measurement of expenses and the economic facts that occur in each one and that will need to be recorded. Define the command steps with the aim of establish the levels of management that decide each activity of the production process or support it. Use of a language regarding cost in such a way that the terms used are understandable by the personnel who execute the expenses. materials and work in order to have the correct elements to prepare the budgets.
- Cost-effectiveness of the models to be applied.
In any system, the main characteristic is that it is affordable, this means that the expenses incurred in its operation have a valued result that does not exceed them.
In this sense it is important:
- Do not establish a complicated cost system that shows a refined cost at the cost of high and excessive administrative work. Establish a simple modeling without many complications and that provides the fundamental indicators necessary to control them administratively. It has to provide reports adapted to the needs of the management and at all levels of its structure.Instead of gathering cost figures extensively, compiled data should be classified according to their importance and presented in a way that allows the manager to make the appropriate decisions in each case.
Essentially reports regarding the cost of production should answer questions and lead to action in their preparation and presentation, rules must be observed that are summarized:
- Economy of time and effort Presentation Presentation Opportunity in your presentation Content
The modeling that is expected to be developed is aimed at solving the needs of planning, calculating and analyzing the cost, as well as recording expenses according to the characteristics of its production process.
Modeling to be done.
In the application of modeling, the possibility of perfecting the system can be analyzed, adapting it to the needs, characteristics and objectives of the entity so that the economic result is useful.
The company must adapt it to its experiences and characteristics, making changes in the changes it requires in each exposed model to record costs, but without deviating from the principles that exist between them for control and analysis.
Once the necessary modeling and forms are prepared to put them into practice, it is very important to put them into operation and that all those who have to do with them understand and agree, which is an essential requirement for the modeling to be used. work and meet your goal.
The application of the modeling that is exposed will provide a better performance of the economic activity of the company since it will allow us to know exactly, the utility and the cost of production that each work order reports.
Model of the Cost Sheet for Work Orders. (Appendix 2)
Objective:
Show all the information corresponding to the work that is being carried out, whether it is sheet metalwork, welding, machining, maintenance or other work, always attending to the requests made by the clients, to obtain the costs and the estimated utility for each work order.
Distribution:
The original is distributed in the workshop.
Frequency:
A work order is made for each request or order made by customers.
Instructions:
For each work or order made, an original work order will be issued, numbered consecutively, recording all the expenses that are related to the model and the value of direct materials, direct labor and manufacturing costs in each order. processed.
The workshops will not be able to do this work if this document is not received, which will accompany them throughout the process and the workshop manager will ensure and guarantee that all expenses are completed correctly.
Annotations:
- Workshop name Client name Work to be done Quantity Quantifications Size Operator name Work order number Order date Start date or time End date or time Delivery date Direct materials (includes date, Materials delivery voucher number, value of direct materials recorded in each request for materials) Total of direct materials used in the order Direct labor (Includes the date, the sale price, the salary rate that is applicable and other salary expenses) Total direct labor costs Indirect manufacturing costs (includes the element the basis to apply and the value) Total indirect costs Sale price (According to the rate established in the LOP). it is the result of adding up the total materials, labor and indirect costs.Gross profit (Sales price less production costs) Administration and sales expenses. Estimated profit of the work order.
1.4.2- Delivery or Return Voucher Model. (Annex 3)
Objective:
Serve to control the exit of raw materials and materials from the warehouse for the consumption of each work order.
Distribution:
It is issued by the warehouse manager keeping a copy and the original is brought to accounting.
Frequency:
A delivery or return voucher is made for each of the requests for raw materials and materials.
Instructions:
For each job requested, an original delivery or return voucher is issued, consecutively numbered and the order number destined and all the material expenses with their unit amount are noted, thus calculating the cost of the materials consumed in the order..
Annotations:
- Entity name Workshop name Delivery date Warehouse that delivers or receives Work order number Lot number Cost center Code corresponding to each product in the warehouse Account Sub-account Item analysis Product description.Unit of measurement. Quantity to use of the product in the order. Unit price of the product. Commercial surcharge or discount. Total unit price. Amount of raw materials and materials (obtained by multiplying column 14 by 15). Stock balance in the warehouse.Total delivery or return.Name and signature of the person dispatching or returning.Name and signature of the recipient.Delivery voucher number.Request number.Date it is delivered.Return voucher number.
Registration Model of Work Orders. (Annex 4)
Objective:
Serve as a control of all the work orders that are in each production area, or that are being useful to both the accounting and economics areas due to the information that is easily accessible and controls the cost activity, such as record of all work orders and as daily control records.
Frequency:
A daily, weekly, biweekly or monthly record is made according to the number of work orders processed daily.
I nstructions:
All jobs that have been processed are registered by consecutive numbering, as well as other data to obtain them quickly if any production in process or finished is required so that it can be located in a short time. This model keeps track of each work order, cost and sale price, as well as the production date and other data.
Annotations:
- Workshop name. Consecutive model number. Entry date. Number of work orders carried out. Production details. Total units carried out. Cost and sale price. Production destination (warehouse or customer). I finish the work Cost Center. Total Observations of the number of orders, the total units and the cost and sale price of all the orders placed on this day.
Summary Model of the Monthly Cost of Work Orders. (Annex 5)
Objective:
Serve as a control of all the orders processed in the month and relate the totals of the costs by expense elements and their reconciliation with the inventory accounts, serving as the main counterpart document with the accounting records.
Distribution:
Through the accounting department.
Frequency:
It is done monthly.
Instructions:
This model details the direct expenses incurred by work order such as: raw materials, salary, tax on the use of labor power and others. It also allows knowing the general administration expenses and the indirect production expenses.
Finally, it allows determining the monthly cost incurred in each order and the finished production.
Annotations:
- Name of the corresponding area or workshop. Date of preparation. Number of the work order (starting with those that were in the process of the previous month). Total amount corresponding to the orders in process of the previous month. Amount of the basic salary corresponding to the current month..Import to social security. Calculation of applying 9.09%. Add the amounts in columns 5 and 6. Amount to social security. Amount of the use tax of the labor force. Amount of raw materials and direct materials used in work orders during the month. Amount of other direct costs charged directly to orders during the month. Amount of indirect production costs. Result of adding the columns from 7 to 12. Result of adding the columns of 4 and 13.Amount of the total cost reflected in column 14, corresponding to the work orders that were in process at the end of the month. The sum of this column must correspond to the balance of the production in process. Amount of the total cost reflected in column 14 corresponding to the work orders completed during the month. The sum of this column is to be used to carry out the proof of operations of the finished production of the month. Total cost amount of the orders finished in the month reflected in column 16.The sum of this column is to be used to carry out the proof of operations of the finished production of the month. Total cost amount of the orders finished in the month reflected in column 16.The sum of this column is to be used to carry out the proof of operations of the finished production of the month. Total cost amount of the orders finished in the month reflected in column 16.
Company Characterization.
The Puerto Padre State Economic Transport Organization with commercial name (OEE Transporte Pto Padre) belonging to the Ministry of Transportation is located on Maceo street # 27 between Martí and February 24, Puerto Padre municipality, Las Tunas province. It was created on October 1, 1996 according to Resolution No. 4/96. Its corporate purpose modified according to Resolution 1691/05 is as follows:
- Provide transportation services for passengers by buses, cars, Ferrobuces, mopeds, motorboats, and other alternative means such as animal-drawn cars, cycles, trucks, vans, cars, and the like, in national currency and foreign currency. cargoes and parcels to the population in national currency and to entities in national currency and foreign currencies.Provide rental services for means of transport or freight, in national currency.Provide parking services in national currency.Provide ticket management services in currency National and foreign currencies. Provide operation services for passenger terminals and ticket sales and reservation agencies, as well as offer general internal services related to the operation of said agencies, in national currency.Provide technical review and technical inspection services, in national currency and maintenance, repair and reconstruction of transport equipment, roadside assistance and other technical services related to means of transport, in national currency and foreign currency. Perform production, recovery, repair and wholesale and retail commercialization of articles, parts, pieces, accessories and aggregates of automotive, animal and human-drawn means of transport, including taximeters and means of communication associated with the means of transport, the system in national currency and foreign currency. Provide rental services of premises and / or spaces in national currency. Provide operation services of automotive service centers and punch bowls in national currency.Carry out contracts with third parties for the administration and operation of their own facilities so that they provide revision, maintenance, repair services and other technical services related to the means of transportation. Provide theoretical and practical instruction services for driving automotive means of transportation and alternatives in the School of Motoring, as well as requalification of own and third-party professional drivers in national currency and foreign currency. Provide advisory services in transport management in national currency. Carry out the production and retail marketing in national currency of surplus agricultural products from the self-consumption to its workers and through the State Agricultural Market.To carry out the wholesale sale of scrap metal to the recovery companies of Commodities in national currency and foreign currencies.
The Company has the following Mission to fulfill the corporate purpose:
His Vision is:
It has a current workforce of 260, including 25 leaders, 27 technicians, 12 administrative staff, 110 workers, 77 service workers and 9 contracts, and it has an organizational structure that is linearly functional (Link 1).
The entity is grouped into 20 units:
- Omnibus Base Puerto Padre. Omnibus Base Vázquez. Autos Base Puerto Padre. Maritime Unit. Rigoberto Batista Workshop. Autos Vázquez Workshop. Siboney Service Center. Delicias Service Center. Vázquez Service Center. Omnibus Terminal. Omnibus San Manuel.Omnibus TerminalFreight Base.Private Carriers.Vázquez Group.Mass Transportation. (Puerto Padre and Vázquez) OEE Address.
Currently the entity is immersed in the Business Improvement Process, developed until the second stage and working on the fourth stage. It is also immersed in the application of Resolution 297 of the Ministry of Finance and Prices .
Application of the proposed modeling.
Development of the cost sheet for work orders.
The Cost Sheet and related models allow:
- The setting of the sale price by manufacturing order.
- The calculation of the cost at the level of the production order.
- The valuation of inventories, especially of production in progress by unfinished order.
The Work Order Cost Sheet is a summary of the three basic cost elements: Direct Materials, Direct Labor, and Indirect Manufacturing Costs.
To fill out the Model of the Cost Sheet for Work Orders in the OEE Workshops we must take into account the following elements:
Direct Materials: In the OEE this item includes the costs of material resources purchased and produced used in production, as long as they are considered direct to this operation. Below we will exemplify the most used materials in each of the fundamental activities in the entity's workshops:
- Maintenance: Lubricants, greases, filters, parts. Joinery: Oxygen, acetylene, tolas, rivets, screws, electrodes, wire, paint, sandpaper, industrial talc. Turning: Calibrated bars, metal ingots. Welding: Rods, Oxygen and acetylene.
- In most machining jobs, no direct material costs are recorded because customers are the ones who bring them and request the specific characteristics of the work to be done.
Direct Labor: all expenses for salaries, accumulated vacations and contribution to the social security of workers directly related to the production process are included.
- The salary to be paid to operators is the result of applying a 40% rate in the case of machining and painting, 45% mechanics and sheet metalwork and 30% cleaning of spark plugs. Salary expenses include 9.09, 12.5 and 25% respectively plus the salary corresponding to the order and are calculated independently by each operator who participates in the preparation of the order and constitutes a counterpart element for the preparation of the payroll.
Indirect Costs: includes expenses for the preparation and assimilation of production, expenses for the maintenance and operation of equipment, general expenses for workshops, indirect costs for production and amortization. They are recorded in the Indirect expense account.
- In the cost of electrical energy we will take daily consumption as a reference, we will divide it by the number of orders placed on the day and multiply it by the price of each kW.
- Maintenance of the lathe and milling cutter is carried out daily before starting the activity and we will distribute it among the total orders placed on the day. The expense is recorded by the amount of lubricant used, which in this case is approximately 250 ml at a cost of 0.2096.
- For the amortization of the equipment we will take the monthly and it is divided between the 24 days of the month to determine the daily, then we will distribute it among the total orders made on the day taking into account the team's working hours in each order of job.
- But we must point out that in the case of the Rigoberto Batista Workshop machines they do not have depreciation since they are very old and have already consumed their use value.
Selling and administrative expenses:
- In the Administration and Sales Expenses for the Rigoberto Batista Workshop we will take the salary of the Brigade Chief and the Data Processor. In this case, the monthly salary of each one is 225 pesos between 23,825 days for 9.44 pesos daily for 2 (Chief of Brigade and Data Processor) I must pay 18.88 pesos per day for this concept plus 9.09 (1.72), 12.5 (2.58) and 25% (5.15) for a total of 28.33 pesos per day which you must distribute among the number of orders placed. To the Administration and Sales Expenses we must also add all the expenses incurred for this concept and in In this case we have the expenses for billing and modeling (3 invoices are used, 2 work order models and 2 materials request and 1 summary of the orders processed on the day).The unit cost of each is 0.084 * 8 models equals 0.67.
Results of the implantation of the models.
Order Cost Sheet.
To exemplify the results of the modeling implementation, we will take as a sample on June 27, 2005 with the completion of 4 work orders (3 for machining and the start of one for sheet metal work, which although the order will not end on the day will accompany the entire production process until its completion, that is, it is an order that is in process)
Work order 001 (make 10 nuts, 2 hexagons and 2 drill holes) Annex 6 in the Rigoberto Batista Workshop by the operators Freddy Bauzá and Salvador Hdez with a duration of 3 hours for the Company of Communal Services has no Material Expenses because the user brought them, it was sold for 94.60 pesos, 40% of each of the value of the piece was paid, for a total of Direct Labor Expense of 57.75 pesos and the Indirect costs were 1.12 for a total of Production costs of 58.87 pesos. This gives a Gross Profit of 35.73, less the Administration Expenses. and Sale of 10.11 reports a profit of 25.62 pesos.
Work order 002 (make connecting rod pin bushing) Annex 7 in the Rigoberto Batista Workshop by the operator Freddy Bauza with 3 hours duration for Public Health Mcpal has no Material Expenses because the user brought them, it was sold at 13.80 pesos 40% of the value of the piece was paid to them, for a total of Direct Labor Expense of 8.28 and Indirect costs were 1.12 for a total of Production Costs of 9.40 pesos. This gives a Gross Profit of 4.40 less the Administration Expenses. and Sale of 10.11 reports a loss of 5.71 pesos.
Work order 003 (wear brake shoe) Annex 8 in the Rigoberto Batista Workshop by the operator Francisco Pérez with a duration of 3 hours for the Aqueduct Company has no Material Expenses because the user brought them, it was sold at 40.00 pesos Of these, 40% of the value of the piece was paid to the worker, for a total Direct Labor Expense of 23.99 pesos and Indirect costs were 1.12 for a total Production Cost of 24.24 pesos. This gives a Gross Profit of 15.76 less the Administration Expenses. and Sale of 10.11 reports a profit of 5.65 pesos.
Work order 004 (make sheet metal work to Lada) Annex 9 in the Rigoberto Batista Workshop by the plasterer Modesto Jaén Cruz with 1 month and 10 days duration because the material resources were not guaranteed because otherwise it would have been carried out in approximately 15 days. The user is Julián Valladares, a leased worker at the Pto Padre Car Base. It was a complex sheet metal belonging to group # 1, covered by Resolution No. 10 of the Ministry of Fzas and Prices. The Material Expenses incurred for it were 82.58 and these are determined by means of a Workshop 4 model, which is where all the materials used in the work are recorded and the Delivery Voucher must also be used (Annexes 10 and 11)which is where the materials delivered by the warehouse destined for production are recorded with the quantity, the unit price and the total amount of everything consumed by said order (this model must be carried out every time materials are requested from the warehouse but in this Only the materials used to serve as an example have been reflected in two models), we must point out that in addition to the registered materials, others such as welding wire were used, which were brought by the user. The sale price was 1472.45 pesos, 45% of the total price was paid to the chapistero for a total of Direct Labor Expense of 933.89 pesos and the Indirect Costs were 7.43 for a total of Production Costs of 1083.90 pesos. This gives a Gross Profit of 388.55 less the Admission Expenses. and Sale 93.07 reports a profit of 293.48 pesos.
Summary Record of Work Orders.
In this model we will record the orders placed on July 27, 2005, Annex 10, these were the machining and sheet metal work 001, 002, 003 and 004, for a total cost price of all the orders placed on the day of 92.21, because 004 is in process, sale price 151.40 pesos, as well as other elements that are necessary for greater control of production.
After completing this work, it was concluded that:
- Ignorance of the real costs and usefulness of each work carried out in the entity's workshops affects decision-making in terms of production and sales.The proposed modeling contains everything necessary for recording, controlling and analyzing costs. The proper implementation of the models will contribute to greater control of the material resources allocated to each activity. There will be daily and historical records that will facilitate the implementation of production plans.
To achieve the proper functioning of economic activity and the increase in productive activity in the company, it is recommended:
- Apply the model of the cost sheet for work orders and the attached models in the workshops of the OEE Transporte Pto Padre. Use modeling as one more method of control to fight against possible manifestations of crime. Train directly linked workers with the development of the system, to achieve its identification with it and for the information to flow correctly. Generalize this work in all the activities carried out in the entity.
Bibliography
- Backer, Morton and Jacobsen. Cost Accounting: an administrative and managerial approach. Revolutionary Edition. Havana. Acosta Castle, Antonio. Concepts and importance of cost. Editorial Ministry of Higher Education. Havana. Collective of authors. Electronic accountant consultant. Cost chapters. DISAIC Consulting House. Havana.delgado Garrido, Raquel. Methodology for the implementation or improvement of cost systems. Camaguey. 1987. Horagren, Charles T. Cost accounting in business management. Revolutionary Edition. Havana. 1971. May, Carlos. Analytical accounting: Costs, returns, prices and results. Edited by the Accounting Planning Institute. Madrid. 1986 May, Carlos. Cost and Management Accounting (3 Volumes). EMPES editions. Havana.Polimeni, Ralpf. Cost Accounting:concepts and applications for managerial decision making. Editora SN Ciudad SI 19 ??. Cost Systems. http: / / www. com / valita- Web / index. Html. Objectives of cost systems. http: / / www. Geocities.com / valita- Web / index. Html.
