Cost of manufacturing cargo based on hours of work, Venezuela

For those of us who have worked in the area of ​​accounting costs, and those who have not, too, we know that the most difficult part is the distribution of plant or factory expenses (factory load), fixed, semi-variable or variable. In standard there are several methods whose application is made on a single basis, direct labor hours or man hours, machine hours or the prime cost, generally. The distribution in standard and other cost systems, of the factory load, on a single basis creates a distortion in the valuation of production, since expenses are subsidized depending on the distribution system.

1. THE PROPOSAL

The ABC (Activity Based Costs) has different distribution bases, adjusted to the causal of costs, which allow greater precision. To this end, in order to simplify and make this distribution more reasonable, and by way of a proposal, I propose below, which in my opinion is, a fairer form of distribution of Plant Fixed Expenses, it is based on the hours of annual work of the company, that is, the sum of the estimated monthly hours. This basis implies that the months with the most hours of labor will carry a greater burden of expenses, which is not only reasonable and fair, but also allows greater precision in determining the cost.

The proposed method allows to improve the accuracy in the costing, considering a better distribution of the factory load, if the impact of the Warehouse, Purchases and Quality Control efforts on inventories and the effects of inflation on ownership are also recorded. of them, the cost of the products will be more precise.

Valuing manufactured products more precisely allows:

• A solid basis for pricing and granting discounts and promotions. Making a better decision to make or buy a product. Positioning products for cost or differentiation.

1. APPLICATION IN THE BUDGET

One of the columns on which the organization of a Company rests, is undoubtedly its budget, a subject on which there are excellent treatises, however as a fundamental part of the proposal of this work, I have some important suggestions, such as:

• Determination of public holidays. Setting of closing days. Working days. Calculation of working hours. Sections and provisions. Proposed application.

• HOLIDAYS DETERMINATION

In Venezuela, as in many Latin American countries, there are not a number of days, national holidays (national holidays), religious, and those of international celebration such as May 1 and October 12. It should also be added that depending on the city or region, patron saint festivals and local celebrations are added to these days, the latter group of days is not included in the study. According to the Organic Labor Law, article 212 contemplates:

“Article 212.- These are holidays, for the purposes of this Law:

• Sundays, January 1, Thursday and Good Friday, May 1 and December 25, those indicated in the National Holidays Law; and Those that have been declared or are declared public holidays by the National Government, by the States or by the Municipalities, up to a total limit of three (3) per year.

During the holidays, work will be suspended and companies and establishments will be closed to the public, without work of any kind being carried out on them, with the exceptions provided for in this Law. ”

As the following table shows:

Party:	Reason:
January 1st	New Year
Movable	Holy Thursday
Movable	Holy Friday
April 19th	Declaration of Independence.
May 1st	Labor Day
June 24	Carabobo's Battle
July 05	Signing of the Independence Act
July 24	Birth of the Liberator
October 12 °	Indigenous resistance Day
December 25th	Nativity of Our Lord Jesus Christ

It should be noted that Carnival Monday and Tuesday are granted by a good part of the Companies in the national territory, in addition, on Saturday of glory, in those companies that work three shifts. The previous table is the first stone of the budget, since it allows by deduction to determine the effective days of labor in the exercise, base of the production and sales budgets. The spreadsheet “Determination of Movable Festivals”, included in the Costs book, specifies the dates corresponding to the days of Carnival and Easter, including glory Saturday, in a span of 10 years, the first of which can be modified at will.

• SETTING THE CLOSING DAYS

Regarding the closing days of production, experience indicates that the best date to close is, without a doubt, the last Sunday of the month, let's see why:

• In the case of physical inventories, it streamlines the counts, by allowing better planning, eliminating the stoppage of production, and therefore, the unproductiveness and pressure that this action generates, therefore, the physical takings are made on the last Saturday of month.

As for the intakes, they become more effective if they are cyclical, that is, one type of inventory per month, so we would have four (4) intakes per year of Finished Product, the same number of Raw Materials and the same number of Packaging Material, except Process that if it is necessary to count it monthly, for the rigorous adjustments. This periodicity can be applied to other types of inventories: stationery and office supplies, parts and spare parts, uniforms and security supplies, etc. The periodicity allows detecting and correcting failures in regulations and procedures on the fly, as well as, if necessary, the removal of material.

So that in the first, fourth, seventh and tenth months of the year, the Raw Material inventory is taken, according to this proposal, in the second, fifth, eighth and eleventh, Packaging Material and in the third, sixth, ninth and twelfth, Finished Product, this means, for a company that closes its fiscal year in December, the intakes will be made according to what is indicated in the “MONTHS” column, and for those whose Fiscal Year Closing date is different from December, the ones in the “PERIODS” column will correspond, that is, these shots will be as follows:

INVENTORY TYPE	MONTHS	PERIODS
Raw material	Jan., Apr., Jul. And Oct.	1st, 4th, 7th and 10th
Packing material	Feb., May., Aug. and Nov.	2nd, 5th, 8th and 11th
Finished product	Mar., Jun., Sep. and Dec.	3rd, 6th, 9th and 12th
Products in process	Every month	All periods

It facilitates the registration of operations, by making cuts naturally as payroll and its related expenses, such as SSO and Forced Unemployment, among other weekly cutting operations.

• It allows a better analysis, since it grants, in some months, a greater number of days, especially in the Companies that the closing of production does not coincide with that of administration and sales.

If this policy is adopted, the spreadsheet "Determination of Month Closings", located in the book "Costs", allows viewing the start and end dates of the month, as well as holidays, and applies only changing the year in (CELL AM4).

• WORKING DAYS

Once the dates of the mobile parties and holidays have been determined, the work hours are calculated, taking into account the Company's work day (s).

The first step allows to indicate the hours, which for days, weeks or months, have to be worked. The spreadsheet "Work Days", included in the book "Costs" shows some combinations of hours for one, two or three work shifts, based on the maximum work day allowed by the Organic Labor Law. For this purpose, the LOT in force in Venezuela establishes, in article 195 the following:

"Article 195.- Except for the exceptions provided for in this Law, the day shift may not exceed eight (8) hours per day, nor forty-four (44) per week; the night shift may not exceed seven (7) hours a day, nor forty (40) a week; and the mixed working day may not exceed seven and a half (7½) hours per day, nor forty-two (42) per week.

It will be considered as daytime the one fulfilled between 5:00 am and 7:00 pm.

It will be considered as a night shift between 7:00 pm and 5:00 am.

It will be considered as a mixed day the one that includes day and night work periods.

When the mixed day has a night period greater than four (4) hours, it will be considered as night time.

Sole Paragraph.- The National Executive may, by means of a special resolution, determine those tasks in which the extension of the night shift may be allowed, said extension being paid as extraordinary night work. ”

However, regarding the workday, the same Organic Labor Law, in its article 196 states:

“Article 196.- By agreement between the employer and the workers, a daily working day of up to nine (9) hours may be established without exceeding the weekly limit of forty-four (44) hours, to grant workers two (2) full days off each week. ”

The application of the previous article authorizes days greater than 8 hours a day, in the daytime, and longer than the times stipulated per day, in order to rest Saturday and Sunday. Likewise, article 190, empowers the Company to continue the day, granting ½ hour for lunch, attributable to the work day, the latter article, provides:

“Article 190.- When, due to the nature of the work, the worker cannot be absent from the place where he performs his services during the hours of rest and meals, the duration of these rests and meals will be imputed as effective work time to his normal working day. of work"

• CALCULATION OF HOURS

For the purposes of this work, the sample considered is governed by the following parameters:

1. Labor Day: Option "A" of 3 Shift Day. Year: Holidays: Collective, from the third Monday of December. Fiscal Year Close: December 31

Totals for days (day and night) and shift (first, second and third), are determined in the leaves "Labor Hours x Days" and "Hours of Work Shifts x", of the book "Costs".

NOTE: In case of use, please adapt to the requirements and conditions.

• SECTIONS AND PROVISIONS

In order to more equitably distribute the sections and provisions that payroll generates, in addition to the traditional ones, that is, vacations, utilities, social benefits (according to the Organic Labor Law, the Company's policy or contractual commitments) and the parafiscales (SSO, INCE, Housing Policy Law and Forced Unemployment.), in my opinion, I suggest you consider:

• Create section and provisions distributed throughout the year, both for holidays and for the vacation period, which also includes the parafiscal sections (Compulsory Social Security, Forced Unemployment, Housing Policy Law and the INCE).Create provisions for profits that Include as a calculation basis all the elements of the salary, in those companies where by contract or policy are provided in this way. Create provisions for social benefits, equally distributed throughout the year, according to the statistics, that is, considering the percentage of layoffs from previous years, or estimated for the year by a planned event, for example closing a line or acquiring a machine or equipment that displaces jobs. Create sections for contractual commitments,In those companies where there is a contract, according to the experience of previous years for some clauses, likewise go to the personnel files, to determine those variable expenses such as HCM, school supplies and others, where the number of people dependent on the personnel Employee has incidence.Create provisions for corrective maintenance or, failing that, amortize them according to the estimated useful life for them, this in order to distribute them and not impact the months in which they occur.Create provisions for corrective maintenance or, failing that, amortize them according to the estimated useful life thereof, this in order to distribute them and not impact the months in which they occur.Create provisions for corrective maintenance or, failing that, amortize them according to the estimated useful life thereof, this in order to distribute them and not impact the months in which they occur.

In this regard, on the sheet “Pres. Expenses. Personal ” of the book “ Costs ”, an application of the above is shown.

• IMPLEMENTATION OF THE PROPOSAL

Once the effective hours of labor have been determined on the basis of the dates of movable days, closings of the month and vacations and holidays, the fixed costs are distributed on them (effective hours of labor), assigning each month the corresponding charge based on proportionality, in this regard, see the sheets “Dist. Personal Expenses ” and “ Dist. Dep. Edif. ” from the book “Costs”.

1. APPLICATION IN PRACTICE

In the cases of expenses such as billed demand for electricity (the fixed part of electricity bills), salaries, benefits and related expenses with payroll for management and supervision personnel, rental of buildings and improvements to leased properties, depreciation of buildings, office furniture, vehicles, installation expenses, office supplies (pallets and baskets), workshop tools, software, molds and dies, scheduled maintenance (preventive) and estimates for corrective, insurance policy expenses, national taxes and municipal, subscriptions and affiliations, corresponding to production, must be charged on the basis of company hours and reviewed and adjusted, in my opinion, every six months or sooner if there is a significant amount in an account.Applying in this way will allow a reasonable distribution of expenses and will avoid significant monthly variations.

1. BIBLIOGRAPHY

• GARAY, J.. (2002). Practical Labor Legislation. Venezuela, Juan Garay Editions. 238 pp.

LABOR LAW

Article 104.- When the employment relationship for an indefinite period ends due to unjustified dismissal or based on economic or technological reasons, the worker shall have the right to notice in accordance with the following rules:

• After one (1) month of uninterrupted work, one week in advance; After six (6) months of uninterrupted work, with a fortnight in advance; After one (1) year of uninterrupted work, one (1) month in advance; After five (5) years of uninterrupted work, two (2) months in advance; After ten (10) years of uninterrupted work, three (3) months in advance.

Sole Paragraph.- In case the advance notice is omitted, the corresponding lapse will be computed in the worker's seniority for all legal purposes.

Article 108.- After the third uninterrupted month of service, the worker will have the right to a seniority benefit equivalent to five days of salary for each month.

1. To the yield produced by trusts or Seniority Benefit Funds, as the case may be and, in their absence or until they are created, at the market rate in a financial entity; At the active rate determined by the Central Bank of Venezuela, taking as reference the six (6) main commercial and universal banks in the country; if the worker had required that the deposits be made in an individual trust or in a Seniority Benefit Fund or in a financial entity, and the employer did not comply with the request; and At the average rate between active and passive, determined by the Central Bank of Venezuela, taking as reference the six (6) main commercial and universal banks in the country, if it were in the accounting of the company.

The employer must report annually to the worker, in detail, the amount accredited to him in the accounting of the company, by way of seniority benefit.

First Paragraph.- When the employment relationship ends for any reason, the worker will be entitled to a seniority benefit equivalent to:

• Fifteen (15) days of salary when the seniority exceeds three (3) months and is not more than six (6) months or the difference between said amount and that credited or deposited monthly; Forty-five (45) days of salary if the seniority exceeds six (6) months and is not greater than one (1) year or the difference between said amount and the monthly credited or deposited; and Sixty (60) days of salary after the first year of service or the difference between said amount and that credited or deposited monthly, provided that he has provided at least six (6) months of service, during the year of termination of the employment relationship.

Second Paragraph.- The worker will have the right to advance up to seventy-five percent (75%) of what is credited or deposited, to satisfy obligations derived from:

1. The construction, acquisition, improvement or repair of housing for him and his family. The release of a mortgage or any other lien on your property; School pensions for him, his spouse, children or with whom he has a married life; and Expenses for medical and hospital care of the people indicated in the previous literal.

If the seniority benefit is deposited in a financial institution or a Seniority Benefit Fund, the worker may guarantee with that capital the obligations contracted for the purposes previously foreseen.

Third Paragraph.- In the event of the death of the worker, the benefits indicated in article 568 of this Law, will be entitled to receive the seniority benefit that would have corresponded to him, in the terms and conditions of articles 569 and 570 of this Law.

Fourth Paragraph.- The provisions of this article do not prevent workers or their successors from exercising the actions that may correspond to them under common law.

Fifth Paragraph.- The seniority benefit, as an acquired right, will be calculated based on the salary accrued in the month to which the accredited or deposited corresponds, including the quota part of what is received by way of participation in the benefits or utilities of the company, in accordance with the provisions of article 146 of this Law and the regulations that must be issued for this purpose.

Sixth Paragraph.- National, state or municipal public officials or employees shall be governed by the provisions of this article.

Article 125.- If the employer persists in his intention to dismiss the worker, he must pay him, in addition to the provisions of article 108 of this Law, in addition to the wages that he has ceased to receive during the procedure, compensation equivalent to:

• Ten (10) days of salary if the seniority is greater than three (3) months and does not exceed six (6) months. Thirty (30) days of salary for each year of seniority or a higher fraction of six (6) months, up to a maximum of one hundred and fifty (150) days of salary.

• Fifteen (15) days of salary, when the seniority is greater than one (1) month and does not exceed six (6) months; Thirty days of salary, when it is more than six (6) months and less than one (1) year; Forty-five (45) days of salary, when it is equal to or greater than one (1) year; Sixty (60) days of salary, when it is equal to or greater than two (2) years; Ninety (90) days of salary, if the above limit is exceeded

The basic salary for the calculation of this compensation will not exceed ten (10) monthly minimum wages.

Sole Paragraph.- The provisions of this article do not prevent workers or their successors from exercising the actions that may correspond to them under common law.

Article 154.- When a worker provides services on a holiday, he will be entitled to the salary corresponding to that day and also to that which corresponds to him by reason of the work performed, calculated with a surcharge of fifty percent (50%) on the ordinary salary.

Article 155.- Overtime will be paid with a fifty percent (50%) surcharge, at least, on the agreed salary for the ordinary day.

Article 156.- The night shift will be paid with a thirty percent (30%) surcharge, at least, on the agreed salary for the day shift.

Article 174.- Companies must contribute among all their workers at least fifteen percent (15%) of the liquid benefits that they have obtained at the end of their annual exercise. For this purpose, liquid benefits shall be understood to be the sum of the net enrichments and those exempted according to the Income Tax Law.

First Paragraph.- This obligation shall have, with respect to each worker, as a minimum limit, the equivalent of the salary of fifteen (15) days and as a maximum limit the equivalent of the salary of four (4) months. The maximum limit for companies that have a share capital that does not exceed one million bolivars (Bs. 1,000,000.00) or that occupy less than fifty (50) workers, will be two (2) months of salary. When the worker has not worked all year, the bonus will be reduced to the proportional part corresponding to the full months of services rendered. When the termination of the employment relationship occurs before the end of the fiscal year, the liquidation of the part corresponding to the months served may be made upon the expiration of the former.

Article 175.- The companies and the establishments or exploitations for profit shall pay their workers, within the first fifteen (15) days of the month of December of each year or at the time established in the collective agreement, an amount equivalent to fifteen (15) days of salary, at least, attributable to the participation in the benefits that may correspond to each worker in the respective economic year in accordance with the provisions of Article 174 of this Law. If this has been accomplished, the employer will not obtain benefits, the amount delivered in accordance with this article should be considered as a bonus and will not be subject to repetition. If the employer obtains benefits whose amount is not enough to cover the fifteen (15) days of salary delivered in advance, the obligation will be considered extinguished.

Article 183.- The following provisions of this Chapter are excluded:

1. Commercial companies whose invested capital does not exceed the equivalent of sixty (60) monthly minimum wages; Industrial companies whose invested capital does not exceed the equivalent of one hundred thirty-five (135) monthly minimum wages; and. Agricultural and livestock companies whose invested capital does not exceed the equivalent of two hundred and fifty (250) monthly minimum wages.

Article 184.- Employers whose activities are not for profit will be exempt from the payment of the participation in the benefits, but must grant their workers a bonus equivalent to at least fifteen (15) days of salary.

Article 219.- When the worker completes one (1) year of uninterrupted work for an employer, he will enjoy a period of paid vacation of fifteen (15) business days. Successive years will also be entitled to one (1) additional paid day for each year of service, up to a maximum of fifteen business days.

Sole Paragraph.- The worker may provide services on the additional days of enjoyment to which he may be entitled according to his seniority, at his free decision. In this case, you will be entitled to additional payment of the wages caused by the work provided.

Article 223.- Employers will pay the worker on the occasion of their vacation, in addition to the corresponding salary, a special bonus for their enjoyment equivalent to a minimum of seven (7) days of salary plus one (1) day for each year from of the validity of this Law up to a total of twenty-one (21) days of salary, when the worker has not acquired the right to receive a bonus higher than the initially anticipated of seven (7) salaries. If it is the case, that the worker must receive, due to his seniority, an amount that exceeds the seven (7) initial wages, he will receive the amount that has been credited, without prejudice to the provisions of this article regarding the additional bonus of one (1) salary day per year of service from its validity.

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