Economic fact: Purchase of Materials - Accounting entry:
- Materials Inventory Accounts Payable Cash
Comments:
Raw materials and supplies are requested through the Purchasing Department (The Materials Request gives rise to the Purchase Order).
Said Materials are kept in a Warehouse (A Reception Report or Entry Report is made) and is delivered only through a Requisition.
Material consumption
- Inventory Product in Process CIF Materials Inventory
The consumption of materials is done through a requisition of materials.
The product in process account would be controlled by each production order and the CIF, by cost center.
Packaging and wraps
- CIF Sales Expenses Packaging Material Inventory
They go to the CIF, in the event that the packaging or wrapping is part of the finished product, such as the glass for yogurt, the plastic for the cheese or sandwich, the bottle in the wine.
They go to the Sales and Distribution Expenses, when the packaging is not part of the finished product, as is the case of a shoe box, the box of a pencil, the packaging of some batteries.
Freight and haulage
- CIFE cash Accounts Payable
In the event that the transport cost is occasional and does not form part of a higher value of the merchandise or raw material.
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The damaged units are those that do not meet standards of production and sold by its residual value are discarded or not additional work is performed on them.
The defectives are those that do not meet the standards of production and should redraft in order to sell them as good or defective merchandise units.
The Material Disposal, are the raw materials left over from the production process and can not return to production for the same purpose, but can be used for a different production process or sold to third parties for a nominal value.
EXTRA TIME: Three situations must be distinguished, first, if the worker worked in anything other than their productive or manufacturing work, the normal day would go to the Work in Process Inventory and the overtime as CIF, both against Payroll.
Second, if the overtime is on a specific work order, I would go Product Inventory in Process versus Payroll.
Third, if the overtime was due to the negligence or inefficiency of the worker, the Inventory of Product in Process (order ##) and Overtime Loss against Payroll would be recorded.
IDLE TIME: If idle time is justifiable (force majeure error), I would go to the CIF, idle time subaccount against Payroll.
If it is not justifiable, it is carried to Loss for Idle Time.
INVENTORY SYSTEMS: The Periodic Inventory system has the Specific Identification, Simple or Weighted Average Cost, UEPS and PEPS valuation methods.
The Perpetual or Permanent Inventory system has the valuation methods Specific identification, Simple Moving Average Cost or Weighted.
GUARANTEED MINIMUM WAGE AND INCENTIVES: This is what is known as piece work; Two cases can occur, in the first, the worker can achieve the minimum production or exceed it, in both cases, it is registered in the Inventory of Product in Process vs. Payroll.
In the second case, the worker does not achieve the minimum production, but the minimum wage must be recognized, therefore what he actually produced would go to the Product in Process Inventory, the difference to reach the minimum would go to the CIF, both against Payroll Payable.
ALLOCATION OF THE BUDGETED COSTS OF THE DEPARTMENTS OF SERVICES TO THOSE OF PRODUCTION: The CIF were applied based on real data, but the rate is estimated.
Estimates or budgets for each Service Department
Distribution of those budgets to Production budgets through a method (Direct, Stepped or Algebraic)
Calculation of the application rate by Production Department
CIF application in each Production Department, multiplying the rate by the real base (The CIF were applied based on real data, but the rate is estimated)
Distribute the real values of the services to the Production Departments
ALLOCATION OF THE REAL COSTS OF THE DEPARTMENTS OF SERVICES TO THOSE OF PRODUCTION.
This assignment is made by any of the methods, direct, stepped or algebraic, and once assigned, the applied CIF can be closed.
CIF Production Department 1 …………..D
CIF Production Department 2.. ………….D
CIF Services Department 1 ……………………….C
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