Activity-based costing (ABC) arises from the needs of a strategic cost analysis and is considered the instrumental part of strategic cost management, according to which it is the activities of all functional manufacturing areas that consume resources and Products consume activities, with the aim of discriminating in activities that add value and those that do not add value to products. The ABC is one of the responses to the great changes in the determination of costs and constitutes a procedure or model of business excellence. Under these precepts, the work entitled “Procedure for calculating the cost of production based on activities (ABC) was developed at the Metallic Productions Company“ Israel Santos ”, DURALMET, Las Tunas;with the objective of developing an activity-based procedure that allows the cost of manufacturing the products to be calculated: doors, windows and lights more accurately, providing relevant information for decision-making. The research carried out also showed that ABC is a highly useful business management technique as it is an effective instrument for decision-making.
Keywords: Cost, System, ABC, Activities
CHAPTER III.
VALIDATION OF THE PROCEDURES TO APPLY THE COST PER ACTIVITY.
Validation of the procedure to be used.
In what follows, the procedure is validated, which in this work it has been proposed to use (Chapter II), with the corresponding adaptations for its application in the Metallic Productions Company "Israel Santos", DURALMET.
For this, the information corresponding to 2007 will be used for three products that make up a varied assortment in the aforementioned company. These productions are: doors, windows and lights.
FIRST STAGE: Determination of the costs associated with the main activities.
Procedure 1.- Build the product value chain.
For the formation of the value chain it was necessary:
- Study the organization structure of the entity (See annexes 2, 3, 4,5 and 6). Know and follow the technological process that takes place in the different workshops and departments until obtaining the final product. Conduct interviews with officials, workers and managers in general.
Taking into account these and other elements, the value chain of the products was structured, as shown in figure No. 1.
Procedure 2.- Define the activities, classify them and prepare the activities map.
This is one of the most important and delicate stages in the application of the ABC cost, so a thorough analysis was carried out to define the most representative activities in each activity center taking into account the ones that generate the most value according to the activity map. It is valid to point out that success in the allocation of indirect costs to products depends as accurately as possible on the number of activities defined.
To recognize the activities, a series of evaluations were carried out, among which are detailed.
- The set of actions that make up the activity must be homogeneous enough to respond to the laws of cost behavior. The knowledge mobilized must constitute a logical set of tasks carried out globally. That each activity has a single form and is recognizable.
For the determination of the activities, the process of elaboration of the products was analyzed, reaching the following definition and classification of the activities:
Orders to suppliers: This is the process by which the buyer communicates with one or more suppliers to request the purchase of a certain product. This request is preferably made to suppliers evaluated by DURALMET as established in Procedure PI003 "Supplier evaluations". This purchase must be accompanied by the technical specifications and any other data that guarantees correct identification of the requested product.
Receipt of orders: It will be done through the following procedure. Firstly, the inspection of the merchandise defined in register R15 "Inspection of Raw Materials" will be carried out. Then, if necessary, suppliers are claimed for non-compliance on the delivery date or for violation of the agreement in the contract that affects the quality of the product.
Payment to suppliers: This is done through different payment instruments depending on the amount and the time it takes for the company to consume the purchased material, for example, certified checks, bills of exchange up to 360 days, commercial credits, etc. This is agreed in the contract and is periodically reviewed in the collection and payment meetings held in the company where said strategy is established.
Design prototypes: Normally, the products manufactured by the company already have plans for cutting, shaping and assembly, however, if a customer requests a product that is not coded in-house, the possibility and feasibility of producing them are evaluated. This process is carried out through the Contracting Procedure that deals with the Quality Management System. Once the offer analysis has been carried out and approved, the business specialists communicate with the clients to deliver it.
Sheet metal cutting and forming: These processes are carried out in the Cutting and Forming Workshop through plans established by the Development Department and which are mandatory. The order to this workshop comes through the Model "Production Order" issued by the UEB of Doors and Windows.
Storage of the Intermediate Product: This is carried out in the intermediate workshops in order to ensure continuous production in the workshop that proceeds and is carried out on parles and is accounted for by the accountants that each workshop owns.
Assemble: This process is carried out in the Assembly workshop through plans established by the Development Department and which are mandatory.
Chemical bath, electrostatic painting and polymerization: Check that the entire system works correctly, Analyze the degreasing bath, Connect the electric heating of the hot baths and the humidity and polymer drying oven, Start the pump, Place the parts in the racks, Insert the rack in the degrease at a temperature of 70 degrees, after 20 minutes it is introduced into the ambient water bath, 10 minutes after it is removed and the parts are dry and free of dirt they are fixed on the holding scaffolds, they are painted by turning it manually so as not to damage the already painted area, once the number of pieces that fill the oven are painted, the scaffolding is placed in it and thus it operates for the polymerization process, at the end of this process the pieces are removed and placed in the cooling zone at ambient air,The pieces are removed from the scaffolding when they are already at a temperature of 30-40 degrees and are passed to the retouching area and finally after being retouched, the pieces are stored.
Packaging: The robot is in charge of taking 10 pieces to the pail and wrapping them, in this way said product is packaged.
Storage: This is mostly done outdoors, but it would be ideal to do it indoors. The Assurance UEB is in charge of receiving the product in warehouse and guaranteeing the quality during storage.
Order management: Most of the productions are related to the Battle of Ideas, so order management is generally done through the State.
Collection from clients: The form of payment and the time to carry it out are established in the contract signed with the client, in the event of non-payment by the client, the strategies to follow with it are: Conciliation and Notification, Shipment to the Court, Visit to the client to renegotiate payment method or mechanism, etc.
Human Resources Management: Organize and guarantee the training processes of workers and cadres, through the determination of their learning needs. Plan, organize and control the measures that guarantee the application of a stimulation system in the Company and its Base Business Units. Organize and control the activity of health and safety at work and measures to preserve the environment, emphasizing those related to activity against fire. Control the application of the internal disciplinary regulations of the organization.
Accounting and Finance Management :Organize, direct and control the economic and financial activity of the Company. Organize and establish the general procedures for the internal control of the Company and the Base Business Units. Direct the process of preparing strategic planning and management by objectives, taking into account the guidelines of the Ministry of Construction and the Management of the Construction Business Group of Las Tunas. Direct, coordinate and control the process of preparing the Plan and the budgets of the Company and the Base Business Units, in correspondence with the guidelines and frameworks issued by the Management of the Business Group for the Construction of Las Tunas,so that the basic objectives of its operation are met and the selected productions and other management indicators are included in it. Present and defend the plan and budget of the Company's income and expenses, both in national currency and in currency before the Directorate of the Construction Business Group of Las Tunas and the Ministry of Construction, ensuring that the mechanisms that favor its execution in the expected volume, economic efficiency and quality.guaranteeing that the mechanisms that favor its execution in the volume, economic efficiency and quality provided are adequately complied with.guaranteeing that the mechanisms that favor its execution in the volume, economic efficiency and quality provided are adequately complied with.
Address:Approve the organization's strategy. Autonomously approve the structure and template of positions, within the framework of the plan or budget of each year. Approve the creation, dissolution, transformation or merger of the Base Business Units, which may be dedicated to the Company's production activity, research and development, worker services, supply, etc. These units must have their mission and main functions approved, always under the principles of business self-financing or budgeted. Approve and put into effect the internal regulations governing work in all spheres of the Company. Sign the Collective Labor Agreement, jointly with the union and respond personally, for the fulfillment of the same, in the aspects that correspond to it. Joint approval with the union,work and rest hours, as established and demand compliance. To approve together with the union, the regulations for the distribution of reserves, of material stimulation of workers and of social development of the group, derived from retained earnings, according to the characteristics of the Company, and based on the regulations established for its use. Sign economic contracts of different types (services, supplies, labor, sale, insurance, lease, consignment, etc.). In the event of noncompliance, reconcile certain measures and / or compensation. Contract with third parties, services that do not exist in its organizational structure, as established. Choose your management team,propose and approve the appointment and movement of subordinate leaders and cadres, according to established procedures.
Logistics Management: Guarantee the activity of loading and unloading (stowage) of the Company's products or supplies. Guarantee the material technical assurance necessary to execute production. Develop general service activities. Plan and enforce the Company's Industrial and Electrical Maintenance Plan. Implement the energy contingency plan approved by the Company's management and higher organizations, maintaining rigorous control and information on the status of compliance. Comply with the Spare Parts Manufacturing Plan. Plan and enforce the Automotive Maintenance Plan as well as the rigorous control over the fleet of light, transport and cargo cars. Guarantee the activity of loading and unloading (stowage) of Company products or supplies. Prepare medium and high complexity devices and provide manufacturing or repair services to other entities (dies). Guarantee compliance with the Company's Energy Plan . Guarantee the material technical assurance necessary to run production. Develop general service activities.
From the previous definitions and taking into account the part of the value that each one incorporates into the process of obtaining the products, the activities are classified into main and auxiliary, as shown in the following table.
Table 1. Classification of activities.
| Activities | Classification |
| Order from suppliers | Principal |
| Receiving orders | Principal |
| Payment to suppliers | Assistant |
| Design prototypes | Principal |
| Sheet metal cutting | Principal |
| Conformed | Principal |
| Storage of intermediate product | Assistant |
| Join | Principal |
| Chemical bath | Principal |
| Electrostatic painting | Principal |
| Polymerization | Principal |
| Packaging | Principal |
| Storage | Assistant |
| Orders management | Principal |
| Payment to clients | Assistant |
| Human resources management | Assistant |
| Accounting and Finance Management | Assistant |
| Address | Assistant |
| Logistics Management | Assistant |
After having formed the system of activities according to the value that they incorporate into the product, the dependency relationships between them are established, or what is the same, the activities map is formed.
ACTIVITY MAP
| Activities
Main |
Auxiliary Activities | |||||||
| Suppliers payment | Warehouse. prod. Int | Warehouse. | Payment to clients | HR management | Management Cont. And End | Address | Logistics Management. | |
| Order from suppliers | X | X | X | X | X | |||
| Receiving orders | X | X | X | X | ||||
| Design prototypes | X | X | X | X | ||||
| Sheet metal cutting | X | X | X | X | ||||
| Conformed | X | X | X | X | ||||
| Join | X | X | X | |||||
| Chemical bath | X | X | X | |||||
| Electrostatic painting | X | X | X | |||||
| Polymerization | X | X | X | |||||
| Packaging | X | X | X | X | X | |||
| Orders management | X | X | X | X | X | X |
Procedure 3.- Identify the activity centers and relate them to the activities.
After selecting the main and auxiliary activities, these were associated with the activity centers where they take place, which will facilitate the cost allocation process.
Purchase of raw material: The company buys its raw material from Metal Cuba, ENAME, ACINOX, etc.
Storage and Hauling: It is stored and then transported to the workshops.
Cutting and Forming: All the pieces are cut and die cut.
Assembly: Products are assembled.
Lacquered: It is where the entire process is carried out to give the products that enameled white.
Packaging and storage: The robot takes the windows to a pail and wraps them, then the products are stored according to their characteristics.
Sales: Through this center, the entire process of requesting orders by customers, attention and monitoring of these, as well as collection management is carried out.
General Administration: Responsible for economic-financial management, human resource management (training, hiring and evaluation), maintenance, insurance and general administration.
The grouping of activities for each activity center is shown in the following table.
Table # 2: Activities to be carried out in the Activity Centers.
| Activity Centers | Activities | Classification |
| Purchase of raw materials | Order from suppliers | Principal |
| Receiving orders | Principal | |
| Payment to suppliers | Assistant | |
| Cutting and Forming | Design prototypes | Principal |
| Sheet metal cutting | Principal | |
| Conformed | Principal | |
| Storage of intermediate product | Assistant | |
| Assembling | Join | Principal |
| Lacquered | Chemical bath | Principal |
| Electrostatic painting | Principal | |
| Polymerization | Principal | |
| Packaging and Storage | Packaging | Principal |
| Storage | Assistant | |
| Sales | Orders management | Principal |
| Payment to clients | Assistant | |
| General Administration | HR management | Assistant |
| Management Cont. And Finance | Assistant | |
| Address | Assistant | |
| Logistics Management | Assistant |
Procedure 4.: Collect the costs (both direct and indirect) and associate them with each activity.
4.1. Identification of the elements of expenses and classify them into direct and indirect.
The collection of expenses associated with each activity was carried out from the primary information issued by the accounting area during the period under analysis. It should be noted that for the purposes of this work, only a sample of all the expenses incurred during 2009 has been taken, considering that they are sufficient to demonstrate the validity of the proposed procedure and at the same time allow for a considerable reduction in the calculations to be made. The following table defines them.
Table # 3: Expenditure elements. U / M: Weights.
| Expense Items | Classification | Amount |
| Raw Material and Materials | Direct | 1 929 928.74 |
| Galvanized Steel Sheet 0.6 mm | 1 075 142.00 | |
| Galvanized Steel Sheet 1.0 mm | 68 529.00 | |
| Semi-tubular rivet | 45 040.00 | |
| Cherri 3 × 10 | 7 528.00 | |
|
51 151.00 | |
|
15 965.00 | |
| Hinges | 56 848.00 | |
| · Locks and keys | 166 261.00 | |
| · Operators | 129 924.00 | |
| Silicone | 306.00 | |
| Parasol glass (Bronze) | 14 501.00 | |
| · Electrostatic painting | 270 538.00 | |
| Thinner | 78.74 | |
| Deterklin (Degreaser) | 15 111.00 | |
| Handles | 12 979.00 | |
| · Oxygen and Acetylene | 27.00 | |
| Workforce | Direct | 2 667 988.00 |
| · Fixed salary | 1 477 391.00 | |
| · Provision for holidays | 162 137.00 | |
| · Salary stimulation | 301 922.00 | |
| · Contribution to Social Security | 242 180.00 | |
| · Tax on the use of labor power | 484 358.00 | |
| Direct Subtotal | 4 597 916.74 | |
| Raw materials and materials | Indirect | 7 923.00 |
| · Electrical materials | 3 216.00 | |
| · Greases and lubricants | 125.00 | |
| · Liquid paint. Diluent | 39.00 | |
| Galvanized steel coil 0.50mm | 2 340.00 | |
| · Worker protection articles | 2 203.00 | |
| Workforce | Indirect | 25 874.00 |
| · Fixed salary | 16 775.00 | |
| · Provision for holidays | 1 522.00 | |
| · Salary stimulation | 633.00 | |
| · Contribution to Social Security | 2 303.00 | |
| · Tax on the use of labor power | 4 641.00 | |
| Depreciation | Indirect | 6 571.00 |
| · Tangible Fixed Assets | 6 571.00 | |
| Indirect subtotal | 40 368.00 | |
| Grand Total | 4 638 284.74 |
4.2 Definition of the criteria to distribute indirect costs among the activity centers.
Table No. 3 shows the distribution criteria used for the distribution of indirect expenses among the centers of activity.
Table # 4. Distribution criteria.
| Indirect expenses | Distribution criteria |
| Indirect material | Depending on the cost of the material used |
| Indirect labor | Depending on the cost of labor used |
| Depreciation | Depending on the value and amount of depreciation, |
To quantify the criteria established in the previous table, interviews were conducted with experts, specialists, managers and workers with more experience.
Table # 5: Criterion for the distribution of indirect costs. U / M: Percent
| Activity Center | Indirect expenses | ||
| Indirect Material | Indirect labor | Depreciation | |
| Purchase of raw materials | 5 | 10 | 5 |
| Cutting and Forming | twenty | 5 | twenty |
| Assembling | twenty | 5 | twenty |
| Lacquered | twenty | 5 | 25 |
| Packaging and Storage | twenty | 10 | twenty |
| Sales | 5 | twenty | 5 |
| General Administration | 10 | Four. Five | 5 |
| TOTAL | 100 | 100 | 100 |
Table # 6 shows the amount of indirect costs distributed to the activity centers taking into account the distribution criteria defined in tables 4 and 5.
4.3. Distribution of Indirect Costs among Activity Centers.
Table # 6: Indirect costs assigned to Activity Centers. U / M: Weights
| Activity Center | Indirect Material | Indirect labor | Depreciation | TOTAL |
| Purchase of Raw Materials | 396.00 | 2 587.00 | 329.00 | 3 312.00 |
| Cutting and Forming | 1 585.00 | 1,294.00 | 1314.00 | 4 193.00 |
| Assembling | 1 585.00 | 1,294.00 | 1314.00 | 4 193.00 |
| Lacquered | 1 585.00 | 1,294.00 | 1 642.00 | 4 521.00 |
| Packaging and Storage | 1 584.00 | 2 587.00 | 1314.00 | 5 485.00 |
| Sales | 396.00 | 5 175.00 | 329.00 | 5 900.00 |
| General Administration | 792.00 | 11 643.00 | 329.00 | 12 764.00 |
| TOTAL | 7 923.00 | 25 874.00 | 6 571.00 | 40 386.00 |
4.4. Define the criteria to distribute the CIs of each CA among its activities.
Table # 7: Distribution criteria.
| Activity Centers | Distribution criteria |
| Purchase of raw materials | In equal parts |
| Cutting and Forming | Depending on the resources used to execute the activity |
| Assembling | In its entirety to assemble |
| Lacquered | In equal parts |
| Packaging and Storage | Depending on the resources used to execute the activity |
| Sales | Depending on the resources used to execute the activity |
| General Administration | Depending on the number of people who carry out the activity. |
Table # 8: Criteria for the distribution of the Indirect Costs of each Activity Center between the Activities of each one. U / M: Percent.
| Activities | Activity Centers | ||||||
| Buy MP | cut | Ensam. | Lacquered | Reservoir. And Alm. | Vtas. | AG | |
| Suppliers order | 33.3333 | ||||||
| Receiving orders | 33.3333 | ||||||
| Suppliers payment | 33.3333 | ||||||
| Design prototypes | fifteen | ||||||
| Sheet metal cutting | 35 | ||||||
| Conformed | 35 | ||||||
| Interm Product Storage | fifteen | ||||||
| Join | 100 | ||||||
| Chemical bath | 33.3333 | ||||||
| Electrostatic painting | 33.3333 | ||||||
| Polymerization | 33.3333 | ||||||
| Packaging | 70 | ||||||
| Storage | 30 | ||||||
| Orders management | 40 | ||||||
| Payment to clients | 60 | ||||||
| Human Resources Management | 25 | ||||||
| Management of Cont. And Finances | fifteen | ||||||
| Address | twenty | ||||||
| Logistics Management | 40 |
4.5 Distribute the CIs of each CA among its activities.
Table No. 9 shows the indirect costs that have been assigned to each of the activities based on what your activity center received in step 4. 3 (Table No. 6), which could be completed using the criteria that were defined in step 4.4 (tables 7 and 8).
Table # 9: Indirect costs assigned from Activity Centers to their Activities. U / M Weights.
| Activities | Activity Centers | ||||||
| Buy MP | cut | Assembling | Lacquered | Packaging and warehouse. | Sales | Admin.
general |
|
| Suppliers order | 1104.00 | ||||||
| Receiving orders | 1104.00 | ||||||
| Suppliers payment | 1104.00 | ||||||
| Design prototypes | 629.00 | ||||||
| Sheet metal cutting | 1468.00 | ||||||
| Conformed | 1468.00 | ||||||
| Warehouse. Intermediate product | 629.00 | ||||||
| Join | 4193.00 | ||||||
| Chemical bath | 1507.00 | ||||||
| Electrostatic painting | 1507.00 | ||||||
| Polymerization | 1507.00 | ||||||
| Packaging | 3840.00 | ||||||
| Storage | 1645.00 | ||||||
| Orders management | 2360.00 | ||||||
| Payment to clients | 3540.00 | ||||||
| HR management | 3191.00 | ||||||
| Management Cont. And Fin. | 1915.00 | ||||||
| Address | 2553.00 | ||||||
| Logistics Management | 5105.00 | ||||||
| Total | 3312.00 | 4193.00 | 4193.00 | 4521.00 | 5485.00 | 5900.00 | 12764.00 |
Procedure 5.- Distribute the costs assigned to the auxiliary activities among the main activities
This is a very important procedure since it guarantees that the main activities are paid for precisely by the resources they consume. It is recommended to use distribution criteria taking into account the criteria of experts, by observing the actions to be carried out in each activity, being able to help with the definition given to each of the activities (procedure 2), since in some way their concept frames the different tasks to be carried out to complete an activity.
This moment also links to the activity map that was defined in procedure 2 itself, which establishes the dependency relationships between the main and auxiliary activities.
The following table shows the proposed distribution criteria to be used to distribute the costs of auxiliary activities to the main ones, with the subsequent objective of determining the cost of the main activities.
Table # 10: Distribution criteria for auxiliary activities to the main ones.
| Exercise | Distribution criteria |
| Suppliers payment | In its whole |
| Intermediate product storage | In equal parts |
| Storage | In equal parts |
| Payment to clients | In its whole |
| Human Resources Management | Enter the number of people linked to the activity |
| Management of Cont. And Finances | Depending on the number of accounting movements |
| Address | Based on salary |
| Logistics Management | Depending on the amount of maintenance performed. |
Table # 11: Criterion of distribution of the Indirect Costs of the Auxiliary Activities to the Main Activities. U / M Percent.
| Activities
Main |
Auxiliary Activities | |||||||
| Suppliers payment | Warehouse. prod. Int | Warehouse. | Customer collection | HR management | Management Cont. And End | Address | Logistics Management. | |
| Order from suppliers | 100 | - | - | - | 5 | twenty | 5 | 5 |
| Receiving orders | - | - | - | - | 5 | twenty | 5 | 5 |
| Design prototypes | - | - | - | - | 10 | 5 | 10 | 10 |
| Sheet metal cutting | - | fifty | - | - | fifteen | - | fifteen | fifteen |
| Conformed | - | fifty | - | - | fifteen | - | fifteen | fifteen |
| Join | - | - | - | - | fifteen | - | fifteen | fifteen |
| Chemical bath | - | - | - | - | 10 | - | 10 | 10 |
| Electrostatic painting | - | - | - | - | 10 | - | 10 | 10 |
| Polymerization | - | - | - | - | 5 | - | 5 | 5 |
| Packaging | - | - | fifty | - | 5 | twenty | 5 | 5 |
| Order management | - | - | fifty | 100 | 5 | 35 | 5 | 5 |
| Total | 100 | 100 | 100 | 100 | 100 | 100 | 100 | 100 |
Once the distribution criteria for each auxiliary activity have been defined, the costs associated with them will be assigned to the main ones, which is shown in the following table. All this on the basis of the causal relationship between auxiliary and main activities established in procedure 2.
Table # 12: Distribution of Indirect Costs of Auxiliary Activities to Main Activities. U / M Weights.
| Activities
Main |
Auxiliary Activities | ||||||||
| Payment prov. | Warehouse. Interm. | Warehouse. | Customer collection | HR management | Management Cont. And End | Address | Logistics Management. | TOTAL | |
| Order from suppliers | 1104.00 | 160.00 | 383.00 | 128.00 | 255.00 | 2030.00 | |||
| Receiving orders | 160.00 | 383.00 | 128.00 | 255.00 | 926.00 | ||||
| Design prototypes | 319.00 | 96.00 | 255.00 | 511.00 | 1181.00 | ||||
| Sheet metal cutting | 315.00 | 478.00 | 383.00 | 766.00 | 1942.00 | ||||
| Conformed | 314.00 | 478.00 | 383.00 | 766.00 | 1941.00 | ||||
| Join | 478.00 | 382.00 | 766.00 | 1626.00 | |||||
| Chemical bath | 319.00 | 255.00 | 511.00 | 1085.00 | |||||
| Electrostatic painting | 319.00 | 255.00 | 511.00 | 1085.00 | |||||
| Polymerization | 160.00 | 128.00 | 255.00 | 543.00 | |||||
| Packaging | 822.00 | 160.00 | 383.00 | 128.00 | 255.00 | 1748.00 | |||
| Orders management | 823.00 | 3540.00 | 160.00 | 670.00 | 128.00 | 254.00 | 5575.00 | ||
| TOTAL | 1104.00 | 629.00 | 1645.00 | 3540.00 | 3101.00 | 1915.00 | 5900.00 | 5105.00 | 19 682.00 |
Procedure 6.- Calculation of the total cost associated with the main activities.
For this calculation, the cost assigned directly to each main activity will be taken into account (procedure 4, step 4.5, table 9) and the costs received from the auxiliary activities will be added (procedure 5, table No. 12), remaining as follows shape:
Table # 13: Total cost assigned to the main activities. U / M Weights.
| Main activities | Directly assigned cost | Assigned cost of ancillary activities | Total cost |
| Order from suppliers | 1104.00 | 2030.00 | 3134.00 |
| Receiving orders | 1104.00 | 926.00 | 2030.00 |
| Design prototypes | 629.00 | 1181.00 | 1810.00 |
| Sheet metal cutting | 1468.00 | 1942.00 | 3410.00 |
| Conformed | 1467.00 | 1941.00 | 3408.00 |
| Join | 4193.00 | 1626.00 | 5819.00 |
| Chemical bath | 1507.00 | 1085.00 | 2592.00 |
| Electrostatic painting | 1507.00 | 1085.00 | 2592.00 |
| Polymerization | 1507.00 | 543.00 | 2050.00 |
| Packaging | 3840.00 | 1748.00 | 5588.00 |
| Orders management | 2360.00 | 5575.00 | 7935.00 |
| TOTAL | 20 686.00 | 19 682.00 | 40368.00 |
SECOND STAGE: Calculation of the total and unit cost of the product.
Procedure 7.- Definition of inductors and calculation of their unit cost.
The activity cost procedure to obtain the total cost of manufacturing a product maintains the principle of traditional cost systems regarding direct costs; they are assigned directly to the products and in relation to the indirect ones the allocation philosophy changes, part of the fact that the products do not consume resources, but it is the activities that consume them. to the products.
Hence, the total manufacturing cost of each of the products is obtained from the sum of the direct and indirect costs; that is, the elements imputed directly to the product and the indirect elements assigned to each main activity.
7.1 Definition of cost inductors.
The imputation of the costs of the main activities to the product is made from the cost inductors, which allow the cost of each activity to be related to the total cost of the product.
To determine the cost drivers, the criteria of the specialists and experts were taken into account for the fair distribution of indirect costs to each activity, taking into account the cause-effect relationship (consumption of resources-activity-product). Inductors, as already mentioned, are the causes or factors that trigger a cost, they must be measurable and remain over time.
The inductors defined to impute the indirect costs of each activity to the product are shown below.
Table # 14: Definition and quantification of cost inductors.
| Main activities | Inductor | Doors | Windows | Lucetas | Total |
| Order from suppliers | Quantity of orders | 3 | 3 | 3 | 9 |
| Receiving orders | Quantity of orders | 3 | 3 | 3 | 9 |
| Design prototypes | Number of prototypes | one | one | one | 3 |
| Sheet metal cutting | Number of sheets cut | 121 | 157 | fifty | 328 |
| Conformed | Quantity of shaped pieces | 36090 | 12979 | 1263 | 50332 |
| Join | Quantity of assembled parts | 36090 | 12979 | 1263 | 50332 |
| Chemical bath | Number of pieces painted | 36090 | 12979 | 1263 | 50332 |
| Electrostatic painting | Number of pieces painted | 36090 | 12979 | 1263 | 50332 |
| Polymerization | Number of pieces painted | 36090 | 12979 | 1263 | 50332 |
| Packaging | Number of batches packed | 3609 | 1298 | 126 | 5033 |
| Orders management | Number of customer orders | 5 | 5 | 5 | fifteen |
7.2 Calculation of the unit cost of the cost inductors.
Once the total cost assigned to each of the main activities has been obtained and the inductor for each one has been identified, the unit cost of these is obtained. This cost is calculated from the formula described in Chapter II; that is, dividing the total cost of each main activity by the total number of inductors of it.
To calculate the unit cost of each of the inductors, the following formula will be used:
CUI = CTA / TI
Where:
CUI: Unit cost of the inductor
CTA: Total cost of the activity
TI: Total inductor
Table # 15 shows the unit costs of each of the inductors.
| Main activity | Total Indirect Cost | Total Inductor | Unit cost |
| Order from suppliers | $ 3134.00 | 9 | $ 348.22222 |
| Receiving orders | 2030.00 | 9 | 225.55555 |
| Design prototypes | 1810.00 | 3 | 603.33333 |
| Sheet metal cutting | 3410.00 | 328 | 10.396341 |
| Conformed | 3408.00 | 50332 | 0.0677104 |
| Join | 5819.00 | 50332 | 0.1156123 |
| Chemical bath | 2592.00 | 50332 | 0.051498 |
| Electrostatic painting | 2592.00 | 50332 | 0.051498 |
| Polymerization | 2050.00 | 50332 | 0.0407295 |
| Packaging | 5588.00 | 5033 | 1.1102722 |
| Orders management | 7935.00 | fifteen | 529.00 |
Procedure 8.- Calculation of the total and unit cost of each product.
As previously mentioned, the total manufacturing cost will be obtained by adding the direct and indirect costs. In the first case, it will include the imputation of the expenses of direct materials and direct labor. In the second case, it will comprise the distribution of indirect expenses (indirect raw materials, indirect labor and depreciation of tangible fixed assets) assigned to the main activities through cost drivers. This is presented in the following table.
Table # 16. Total cost of each product. U / M: Weights
|
Expense items |
products | Total cost | ||
| Doors | Windows | Lucetas | ||
| Direct costs: | ||||
| Raw materials and materials: | 664860.00 | 1236035.00 | 29033.74 | 1929928.74 |
| Galvanized Steel Sheet 0.6 mm | 231026.00 | 835123.00 | 8993.00 | 1 075 142.00 |
| Galvanized Steel Sheet 1.0 mm | 68529.00 | - | - | 68 529.00 |
| Semi-tubular rivet | - | 45040.00 | - | 45040.00 |
| Cherri 3 × 10 | 7528.00 | - | - | 7528.00 |
|
25647.00 | 24686.00 | 818.00 | 51151.00 |
|
5282.00 | 10683.00 | - | 15 965.00 |
| Hinges | 56848.00 | - | - | 56848.00 |
| · Locks and keys | 166261.00 | - | - | 166261.00 |
| · Operators | - | 129924.00 | - | 129924.00 |
| Silicone | - | - | 306.00 | 306.00 |
| Parasol glass (Bronze) | - | - | 14501.00 | 14501.00 |
| · Electrostatic painting | 86680.00 | 179664.00 | 4194.00 | 270538.00 |
| Thinner | 11.00 | 67.00 | 0.74 | 78.74 |
| Deterklin (Degreaser) | 4042.00 | 10848.00 | 221.00 | 15111.00 |
| Handles | 12979.00 | - | - | 12979.00 |
| · Oxygen and Acetylene | 27.00 | - | - | 27.00 |
| Workforce | 889331.00 | 889331.00 | 889326.00 | 2 667 988.00 |
| · Fixed salary | 492464.00 | 492464.00 | 492463.00 | 1 477 391.00 |
| · Provision for holidays | 54046.00 | 54046.00 | 54045.00 | 162 137.00 |
| · Salary stimulation | 100641.00 | 100641.00 | 100640.00 | 301 922.00 |
| · Contribution to Social Security | 80727.00 | 80727.00 | 80726.00 | 242 180.00 |
| · Tax on the use of labor power | 161453.00 | 161453.00 | 161452.00 | 484 358.00 |
| Subtotal Direct Expenses | 1554191.00 | 2125366.00 | 918359.74 | 4597916.74 |
| Indirect expenses: | ||||
| Order from suppliers | 1044.00 1 | 1044.00 | 1046.00 | 3134.00 |
| Receiving orders | 676.00 | 676.00 | 678.00 | 2030.00 |
| Design prototypes | 603.00 | 603.00 | 604.00 | 1810.00 |
| Sheet metal cutting | 1258.00 | 1632.00 | 520.00 | 3410.00 |
| Conformed | 2443.00 | 879.00 | 86.00 | 5819.00 |
| Join | 4172.00 | 1501.00 | 146.00 | 5819.00 |
| Chemical bath | 1858.00 | 668.00 | 66.00 | 2592.00 |
| Electrostatic painting | 1858.00 | 668.00 | 66.00 | 2592.00 |
| Polymerization | 1470.00 | 529.00 | 51.00 | 2050.00 |
| Packaging | 4007.00 | 1441.00 | 140.00 | 5588.00 |
| Orders management | 2645.00 | 2645.00 | 2645.00 | 7935.00 |
| Indirect expenses subtotal | 22034.00 | 12286.00 | 6048.00 | 40 368.00 |
| Total cost | 1576225.00 | 2137652.00 | 924407.74 | 4 638 284.74 |
| Quantity produced (units) | 12 979 | 36 090 | 1 263 | 50 332 |
| Unit cost | 121.44425 | 59.231144 | 731.91428 | - |
The relevance in the use of costing by activities is not in the economic benefits but in its effectiveness in accumulating costs and in the management of activities that contribute to using resources efficiently, allowing the following aspects to be analyzed:
- Which activities consume the most resources? How much does the product cost in each area of responsibility? How much does each part of the production process of a product cost?
CONCLUSIONS
- The Metallic Productions Company DURALMET determines the cost of its productions through a process cost system, designed on the basis of applying indirect costs to each product by using coefficients or rates. Traditional cost systems (by processes) do not provide adequate and timely information for strategic cost management. Activity-based accounting (ABC Costing) is an advanced management technique that allows determining product costs based on the organization's value chain. Determination of the manufacturing cost of the doors, windows and lights applying the activity costing also provides information related to the way in which the entity's resources have been used,from relating these to the activities that consume them.
RECOMMENDATIONS
- Incorporate the distribution of indirect costs based on activities into the design of the cost system for processes that have been implemented. Determine the cost of manufacturing doors, windows and lights from activities, taking into account all the resources used in its elaboration. This will allow them to systematically compare the results in relation to those obtained with traditional cost systems. Gradually apply the proposed procedure to the entire range of their productions for a future generalization of the same. Refine the system of activities based on improving the chain of value, considering the possible competitive advantages with its clients and competitors.
