Product costs and period or production and distribution costs

Product costs

The three elements of the cost of production of a manufactured article are called: "product costs", because they are incorporated into the value of the manufactured products, through asset accounts and are applied to the results mediately and gradually as such products are sold. products, a situation that may occur in the period of manufacture and accounting after the period during which the costs of the product were incurred.

The sum of direct raw material and direct labor is known as PRIMO COST and the sum of direct labor and indirect manufacturing charges is known as CONVERSION COST.

product-costs-and-costs-of-the-period-of-production-and-distribution

Period costs

Period costs are disbursements made during the same accounting period of the year. They are not added to the value of the manufactured products, but are charged directly to the income statement, these costs are caused by everything that is done additionally in order to be able to sell the manufactured products such as: storage costs, delivery costs merchandise, company administration costs, these costs are classified into:

Distribution Costs. Administration Costs.

The total cost is made up of the sum of the production cost and the distribution costs, the previous three and other additional costs. In turn, the sale price is determined by adding a percentage of profit to the total cost. This is the traditional way of integrating the sale price.

Variable or direct costs are those that tend to fluctuate in proportion to the total volume of production, sale of articles or the provision of a service, are incurred due to the activity of the company. They are those whose magnitude fluctuates in a direct or almost directly proportional ratio to the changes registered in the volumes of production or sale, for example: direct raw material, direct labor when piecework is paid, income taxes, sales commissions.

Fixed or periodic costs

They are those that in their magnitude remain constant or almost constant, independently of the fluctuations in the volumes of production and / or sale. They are constant within a certain range of production or sales volumes. Examples: depreciations (straight-line method), property insurance premiums, rental income, fees for services, etc.

Semi-variable costs

They are those that have a fixed root and a variable element, undergo sudden changes when certain changes occur in the volume of production or sale. As an example of these: indirect materials, supervision, water, electrical force, etc.

Characteristics of variable or direct costs:

There is no variable cost if there is no production of items or services. The variable cost quantity will tend to be proportional to the production quantity. The variable cost is not a function of time. The simple passage of time does not mean that a variable cost is incurred.

Characteristics of the fixed costs.

They tend to remain the same in total within certain ranges of capacity, regardless of the volume of production of goods or services achieved. They are a function of time. The amount of a fixed cost does not change basically without a significant and permanent change in power. of the company, either to produce articles or to provide services. These costs are necessary to maintain the structure of the company.

What is a cost center?

It is a logical division within an organization, established in order to accumulate, distribute and determine costs, with a responsible person in charge of each established center.

In manufacturing activity, cost centers are classified into:

Production Centers  Service centers.

Production Centers

They are those through which the product passes and that directly contribute to its manufacture. It is identified with a production department under the supervision of a boss who establishes in terms of the types of operations, assigned machinery and work skills that form the core of each production center.

Service centers

It does not contribute directly to production; rather, it provides an auxiliary service to other cost centers, both of production and of services: Its function is to make productive operations more efficient, they are subdivided into productive and general services.

Systems by production orders and by processes.

Production order system: collects the costs for each physically identifiable order or batch as it passes through the plant's production centers. Applicable raw material (mp), direct labor (mod), and indirect costs (ci) are accumulated in one work order. It is applicable to companies where it is possible and practical to distinguish batches, sub-assemblies, assemblies and finished products.

Two controls are kept in the order system: the order control and the cost sheet control.

This accounting system of costs is applied in the cases in which the production depends basically on the orders or orders that the clients make or orders dictated by the management to maintain an existence in the warehouse of finished products.

Control documents:

The orders: have a progressive number with the indications and specifications of the type of work to be carried out.

The cost sheets: for each production order, a record will be opened in the so-called cost sheet that will summarize the 3 elements of the cost of production referring to the units produced.

Process System.

All production costs are collected during an accounting period and those costs are subsequently distributed among the number of units manufactured during that period.

The default cost system:

"Estimated" cost system is based on estimates that are made based on previous experiences and on the manufacturing conditions expected to process an item or fulfill an order. It has no scientific basis and its objective is to estimate cost figures that allow anticipating the results of the period.

Standard cost system.

They are calculated on a scientific basis in order to determine what a product should cost, calculated with the efficiency factor and serves as a cost meter, it is a reflection of what a cost should be.

Standard direct cost system.

It is based on standard cost and the theory of marginal analysis.

Example of cost sheet for work orders.

Work Order No.		Company "Z" SA		Price		Deadline
Client
Name				Description:
Address
Date	materials			Workforce				Fees indirect
	Description	Qty.	Price	Operation.	Hours	Share	Qty.	Base	Share	Qty.


	Total			Total				Total
				Summary
				Sales
				Cost of Manufacturing
				Direct materials
				Workforce
				Indirect expenses applied
				Total
				Gross profit

Main procedures for the cost of the material used.

Constant average or weighted average cost:

It is a reasonable approximation procedure where the cash amount of inventories is divided by the number of units in stock, it is carried out for each entrance to the warehouse to obtain the average cost of valuation.

Warehouse Movement.
Arrival / departure date	Species		Stock	$ Unit	Half price	Values
	Entry	Departure				Should	To have	Balance
March 3	100		100	10		1000		1000
March 17	100		200	14		1400		2400
March 24	100		300	12		1200		3600
March 30		150	150		12		1800	1800

We can see that the column $ Unit is multiplied by the number of products that enter our warehouse, that is, if each unit costs 10 and 100 enters on March 3, we will have to multiply 10 * 100 = 1000 that we will write down in the column Must and therefore in our Balance column.

In the case of any sale or exit from the warehouse we will have to divide the balance by the number of stocks prior to the exit of the merchandise, that is, 3600/300 = 12 and this will be the average price of each item that we will have to multiply by the number of products that come out that is to say 12 * 150 = 1800 the result we will place it in the Credit column and we will subtract it from the balance that we already had, that is: 3600 - 1800 = 1800 in balance.

First inputs, first outputs. (First in, first out) (FIFO) (PEPS).

It is based on the logical interpretation of the movements of the materials, therefore the cost of the last purchases is the cost of stocks, in the same order that they entered the warehouse.

We can see that the sale is for 150 units, from the first batch we take 100 at the price of 10 and the 50 that we lack from the next batch with the price of 14, both are multiplied by the units that leave the warehouse, that is, 10 * 100 = 1000 and 14 * 50 = 700, they are placed in the Credit column and subtracted from the balance that we already had, thus leaving 1900.

The balance is made up of 50 pieces at a cost of 14 = 700 and 100 pieces of 12 = 1200, if we add the amounts it gives us 700 + 1200 = 1900.

Last in, first out (UEPS) or most recent batch (Last in, last out), (LIFO).

When evaluating the exits from the warehouse based on the cost of the last entries, the stock of materials is valued at the oldest costs.

This procedure is applicable when costs are constantly increasing, ensuring inventories below their average value in times of inflation.

Let's observe that the 100 pieces of the most recent batch that we acquired are taken and that the remaining 50 pieces of the batch that follows the most recent one, taking as follows:

100 * 12 = 1200

50 * 14 = 700

The balance will be made up of 50 pieces of 14 = 700 and 100 pieces with a value of 10 = 1000, which gives us the sum of 1700.

It is important to emphasize that the balance is different in the three methods and they are used according to the needs of the company.

Physical inventories:

It is the count and revision of the physical level of the articles produced and raw material against that registered in the control of the warehouse cards.

They can be modified due to the following causes:

Errors or omissions noted in the output vouchers of materials. Low in materials due to atmospheric effects or the passage of time. Lows caused by improper handling of materials.

Physical inventories are generally not carried out simultaneously in all warehouses because it would force the activities of the cost centers to be paralyzed, in addition to absorbing large numbers of personnel.

Physical counts should be planned at the beginning of a cost period, spread throughout the year. Physical inventories consist of carrying out verifications by comparing the auxiliary cards of the warehouse against the physical stocks.

The differences in inventories must be analyzed, those that are not due to accounting errors are taken to a profit and loss account that can be called "Inventory differences", adjusting the card balances to actual inventories.

Due to accounting errors, the corresponding corrections will be made, when you have a direct person in charge, it must be charged to the account of various Debtors.

Accounting for waste, damaged and defective materials.

Waste: They represent the loss suffered by the materials during their transformation, the normal degree of waste must be included within the production cost, in the event that the income is sold, it is recorded as:

Cost recovery.Benefit or diverse use.

Damaged Materials: (Defective that has a fix). They constitute the materials that are defective or fail due to an accident or due to the action of natural elements, but which can be corrected with an additional operation.

(complementary cost).

Defective materials: They are the materials that during the transformation suffer some damage that causes them to lose quality and which is generally considered second-class.

Waste: some materials suffer from evaporation and weight loss, due to the fact that they are stored for a long time, this decrease in the amount of raw material cannot always be precisely measured what constitutes waste.

Accounting treatment of warehouse differences.

When waste and waste are considered normal.

Concept	Should	To have
Indirect charges	xxx
Raw materials warehouse		xxx

When a provision is established for waste and variations in the warehouse for a previously fixed amount:

Concept	Should	To have

Indirect charges	xxx
Provision for variations and waste.		xxx

When the waste has a recovery value per sale.

Concept	Should	To have
Waste warehouse	xxx
Raw material warehouse		xxx

When the differences found are considered an extraordinary loss.

Concept	Should	To have
Extraordinary Loss	xxx
Raw materials warehouse		xxx

When it comes to establishing responsibilities.

Concept	Should	To have
Various debtors	xxx
Raw materials warehouse		xxx

In some cases, when applying the differences, it is not possible to affect the cost of production due to adjustment difficulties in the production itself:

Concept	Should	To have
Sales cost	xxx
Raw materials warehouse		xxx

Inventory rotation.

It is the number of times that the materials have been replaced during a period of costs in order to know the circulation of the raw materials used in production.

Raw Material Inventory Rotation:

Raw materials consumed / Inv. Average of raw materials.

Average consumption period:

# of days of mp inventory cost / rotation period

Inventory rotation of Production in process:

Production cost / Inv. PP average

Average production time:

# days of the period of costs / rotation of invs.. pp

Rotation of invs. Of arts. Term.

Net Sales / Inv. Average of arts. Term at sale price.

Average sales lead time:

# of days of the period of cost / rotation of invs. of arts. Term.

In calculating inventory turnover rates, it covers the following purposes:

Indicates the degree of efficiency in inventory control. Shows whether or not there is an excessive investment in inventories. It indicates the efficiency in the production volumes for the year.

The measures that achieve an increase in the turnover rate are:

Decrease the average inventory Increase the volume of production and sales for the year Accounting and control of labor:

The labor force represents the cost of the work carried out by the workers who directly or indirectly contribute to the process of transforming the raw material. The main objectives are:

Have perfect determination of the hour / man. Maintain without significant variations the cost per hour / man. Efficiently prepare the payrolls of the workers. Correctly register the labor.
1. To each cost sheet. To factory indirect charges.
Determine and control the time for each operation or manufacturing order. Apply the most appropriate incentive system. Count the cost of these incentives to the corresponding workforce. Control the extra time applied to production. Control idle time. Provide information on the cost of labor.

Basic concepts of direct and indirect labor:

Direct labor: it is the second element of the cost of production and is represented by the intervention of the human factor, in the transformation of the raw material, it is made up of wages, bonuses and wages that directly affect the production of an item.

Characteristics of Direct Labor:

It directly affects production. Its amount can be identifiable and quantifiable in an article produced or in a certain process. Its cost can be assigned to manufactured products, services or specific manufacturing orders.

Indirect labor.

It constitutes the amount of wages, bonuses and wages that indirectly affect production and that it is not easy to identify them with any specific production order.

Characteristics of indirect labor:

Indirectly affects production. Represents the cost of labor that cannot be directly assigned to a specific product or order. It is not easy or practical to apply its cost to a specific product or service.

Functional organization of the Workforce

Payroll: it is a document that records the salaries that must be paid at the end of the week, fortnight, based on individual attendance cards.

It serves:

As a record of the wages earned by each worker. Record of the number of hours of mod and moi Analytical control of wages by cost center.

Payroll is divided into three groups:

Weekly payroll or line (workers). Biweekly payroll (employees). Confidential biweekly payroll. (officials).

They are based on article 88 of the Federal Labor Law of Mexico.

Example of the weekly payroll format.

Week no.		Of the day		Up to date
IMSS certificate	RFC	Name	Hrs. ordinary	Extraordinary	Fee per hr.		Perceptions
					Ord.	Ext.	Ord.	Extr.	Cousins	Total

Deductions
Taxes	SS fee	Labor union	Savings bank	We lend	Others	Total	Net scope.	I received

Practical case:

The information on the payroll for the second week of January 2001 is as follows: 1.-

Total wages		$ 13,450.00
Less
ISR		$ 750.00
IMSS fees		$ 400.00
Union dues		$ 100.00
Payment to the debit of worker "R"		$ 1, 900.00
	Net Amount	$ 10,300.00

2.- The weekly indemnity provision amounts to $ 500.00.

3.- The provision for contributions of 5% to INFONAVIT amounts to $ 672.50.

4.- The weekly provision for uniforms is $ 200.00.

5.- According to the payroll distribution sheet, the amount of direct wages is $ 12,500.00 corresponding to $ 8,700.00 to order no. 1 and $ 3,000.00 to order no.2.

6.- According to the same distribution sheet, indirect wages import $ 2,322.50.

7.- Subsequently, compensation is paid to a worker for $ 300.00.

8.- INFONAVIT contributions are paid for $ 672.50. (In practice, they are paid every two months past due)

9.- Uniform is purchased for a worker for $ 150.00

10.- The employer-employee fees are paid to the IMSS for $ 400.00. (In practice, they are paid every two months past due)

11.- Union dues are paid in the amount of $ 100.00.

Concept	Partial	Should	To have.
1) Labor		13450
Banks			10300
Various debtors			1900
Income tax			750
Various creditors			500
= posting of the payroll payment for the 2nd week of January.
2) Labor		500

Provision for staff compensation		500
= weekly provision record.
3) Labor	672.50
Provision for INFONAVIT		672.50
= Weekly provision record
4) Labor	200
Uniform provision		200
= Weekly provision record.
5) Production in process	12500
Workforce		12500
= register of direct wages to production according to the payroll distribution sheet.
6) Indirect charges	2322.50
Workforce		2322.50
Application of indirect wages
7) Provision for staff compensation	300
Banks		300
= record of payment of compensation to worker "R"
8) Provision for INFONAVIT	672.50
Banks		672.50
= Payment of 5% to INFONAVIT
9) Provision for uniforms	150
Banks		150
= Record of the purchase of a uniform.
10) Miscellaneous creditors	400
Banks		400
= I pay fees to IMSS
11) Various creditors	100
Banks		100

Registration and Controls used by the Human Resources Department.

Personnel register: an individual file is used where all kinds of documentation and correspondence related to the worker are filed.

Personnel control card: this register contains all personal data, amount of wages, salaries, etc. Discounts, net amount, observations, etc.

Attendance card or scorecard: this card controls the employee's daily attendance, without having to know their work.

One card is used for each worker for one week.

Overtime card: the additional time to the worker's ordinary working day is controlled with the authorization of the department head. Correspondent.

Payroll distribution card: its purpose is to determine in which work the time was used, in order to carry out orders, processes, operations, etc.

Payroll or list of lines: the salaries, wages, etc. that must be covered each week are recorded, based on the entry cards and staff balance.

Incentive systems:

By time worked: work per day or per hour. The time that the worker remains in the plant is paid, it is called wages, because the remuneration is determined by the work day regardless of the volume of production achieved.

For work done or piecework. The amount of work done by the worker is paid. Known as incentive or piece work, increasing performance will not mean working more hours but increasing volume in the same time worked.

Incentive plans:

Produced part plan. (for the pieces that are produced) Taylor Plan of differential salary per piece. (It establishes a minimum and a maximum standard for production and based on these the worker is paid.) Halsey's profit-sharing plan. (the worker is rewarded if he produces in less time the standard set). Standard time plan. (A standard production time is established and if it is improved, that is to say, the same quantity of pieces is produced in less time, the worker is 100% rewarded.) Salary incentive point system plan. (The standard of each operation is determined and translated into points, the worker who produces those points in the shortest time will be remunerated.) Group incentive plan: bonuses are made for group effort and not for individual effort, the group must achieve the goals together.

Manufacturing labor benefits:

Extra time (art.66 and 68 LFT)

Normal working hours are 8 hours with one hour of rest.

More than those 8 hrs. They will be considered as extras, and should not exceed 3 hours a day or more than 3 times a week, that is, only 9 extra hours can be performed. These will be paid twice and if it exceeds those 9 hours. They will be paid triple.

Social security (art.6 LSS)

There is a voluntary and mandatory regime.

The compulsory includes:

o Work risks. o Diseases and motherhood. o Disability, old age, unemployment in old age and death. or nurseries.

Gratifications:

Bonus. Amount paid before December 20 of each year, is a minimum of 15 days of salary.

Holidays and holidays:

Every worker who is at least one year old is entitled to vacation pay.

1 year	6 days
2 year	8 days
3 year	10 days
4 year	12 days
5 to 9 year	14 days
10 to 14 year	16 days

Compulsory rest days: holidays and Sundays (if you work on Sunday you will have to pay a premium to the worker).

Holidays

1 january

February 5

May 1

September 16

November 20

December 1

December 25

The INFONAVIT Law obliges employers to contribute in favor of workers in order to create financing systems that allow workers to obtain a loan to purchase a home.

Medical, healthcare, school, housing, sports and recreational services. Group and accident or disease insurance. Employee participation in profits.

Accounting and control of indirect charges.

Objectives:

Collect and accumulate manufacturing costs that are not direct raw material or direct labor in the cost of producing an item, because they are not accurately identified in the product manufactured in a production order or process productive.

Its application to the costs of manufactured articles to form an element of the cost of production, is done approximately.

Assign to each unit of the product produced the precise figure that corresponds to it for indirect charges.

Select the most equitable bases to prorate indirect charges.

Component elements of indirect charges:

Indirect manufacturing charges are integrated from the point of view of the cost of production object into three major components:

Indirect raw material: includes all the materials that are not an immediate part of the manufactured product, such as factory accessories or very small quantities that make it impossible for the amount to be charged directly to the finished product.

Indirect Labor: Covers all supervisory work, records, and service duties that cannot be directly charged to the manufactured product.

General manufacturing overhead: Includes tangible overhead costs incurred not by the manufactured item, but for the general service or benefit of all or part of the cost centers.

Such costs can be divided into:

Indirect disbursements.Depreciations of fixed assets.Amortization of deferred charges.

Application of factory expenditures paid in advance.

Her CARACTERISTICS:

They are difficult to identify with products, orders or operating processes. It is not easy to apply them to products, orders or operating processes.

Classification of indirect charges.

From its degree of variability	Fixed
	Variables
From the division of the plant	Departmental
	Generals
From the moment of your calculation	Royal or historical.
	Default
Since its integration	MPI
	MOI
	CIG

Fixed:

They are indirect costs that have no relation to the volume produced, because they are independent of the production volume. If the production is null, these costs will exist anyway, an example of them are: depreciation, leasing, amortizations, etc.

Variables:

These are the indirect costs that fluctuate directly and proportionally to the changes in production.

Example: light, mat. Cousin. Indirect, etc.

General:

They are those that affect all production and therefore all cost centers, such as the accountant's salary, lease.

Departmental:

They are those that are related to and affect a specific cost center, example: mechanical workshop salary.

Real or historical:

They are those that are materially disbursed and accounted for after incurring them.

Predetermined:

They are those that are estimated based on a quora of ci or based on a budget.

They are accounted for before incurred.

For the purposes of accumulation and distribution of historical factory indirect charges, the factory shall be divided into the following cost centers.

Productive cost center: they have the function of transforming the mp into manufactured articles.

Non-productive or service cost center:

Productive service centers: they present the complementary function in production, having a defined intervention. General service centers: they have the function of providing services to productive centers and services to productive centers.

Accumulation of costs:

The accumulation of indirect costs is the first step prior to the mechanics of apportionment of indirect charges, they can be done as follows:

Establish a G / L account for each production and service cost center, with its corresponding auxiliaries resulting in as many G / L accounts as there are cost centers. Establish a single G / L account with a subaccount for each cost center.

Pro rata of indirect factory charges.

When you want to have a departmental analysis of factory indirect charges, the accounting problem has the following phases:

The departmental application of indirect charges.

The internal distribution of departmental indirect costs, that is, the interdepartmental apportionment.

The accounting solution is identified with what is called Primary, Reciprocal, Secondary and Final Proration.

Primary apportionment.

It consists of distributing and accumulating indirect charges primarily between existing production and service centers.

To perform the primary apportionment it is necessary to use a distribution base and apply the following formula:

Indirect charge / selected base = distribution factor.

Reciprocal apportionment:

It is an interdepartmental distribution of cost centers that provide services reciprocally, they can be done using estimated percentages or conventional methods.

Secondary apportionment:

It consists of spilling or redistributing the indirect charges accumulated in the service centers to the different production centers. It is also carried out through distribution bases, starting with the costs of the centers with the greatest service it provides to other production centers, that is, from the most general to the least general, until the indirect charges are accumulated in the production centers only.

Final apportionment.

It is the total of indirect charges accumulated in each of the production centers spilled through a selected base to the different articles or manufacturing orders processed in the cost period.

Table of bases for primary apportionment.

Indirect charge	Distribution base.
MPI	Direct allocation to cost centers based on warehouse exit requisitions.
MOI	Indirect allocation if identified with the respective cost center and if not
	distribution according to the hours worked by direct labor.
Electric power	Allocation based on KW consumption. Hrs. of each cost center
Repairs and spare parts	Allocation based on the value of the machinery in each cost center.
Internal transportation.	Allocation based on the mpd consumed in each workplace.
Factory Income	Allocation based on the area of each cost center.
Depreciation of machinery and equipment	Assignment based on the units produced or, failing that, based on the hours. Machine consumed.
Depreciation of factory building.	Allocation based on the occupied surface of each cost center.
IMSS employer account	Allocation of IMSS settlements

Secondary Proration.

Mechanical workshop service.- with distribution base allocation in the machine hours worked in each cost center.

Raw materials warehouse service: distribution base to be assigned according to the cost, volume or weight of the materials used by each cost center.

Boiler service: distribution base estimated percentages according to the Industrial Engineering calculations.

Electric power service: allocation based on the estimated kilowatts / hour for each cost center.

Building service: allocation based on the area occupied by each cost center.

Surveillance allocation: allocation based on the number of workers in each center.

Office services costs: allocation based on the man-hours worked in each center or in estimated percentages.

Final pro rata distribution bases.

Factor on the basis of time.

Number of machine hours.

Number of direct hours of work.

Number of direct and indirect hours of work.

Number of kilowatt hours of consumption.

Factor on the basis of value:

Direct raw material cost.

Direct labor cost.

Prime cost (mpd + mod)

Factor based on the magnitude:

Number of units produced.

Number of kilos or tons of articles.

Volume number of articles.

Mixed factor.

Based on time, value and magnitude.

Costs

Investment costs.

This cost is also known as real or incurred cost is formed by the set of efforts measured in monetary units that have to be disbursed to carry out the production of goods or services.

Replacement or displacement or opportunity costs.

The cost of a product is equivalent to what is sacrificed to obtain it, that is, the articles that are not produced are the cost of the produced articles that were preferred.

Absorbent or traditional cost.

It consists of the allocation of all production costs to manufactured items.

Total absorbent costs.

It is the one that incorporates into the products produced in a given manufacturing period the utility of the costs incurred in it.

Partially absorbent cost.

It incorporates all the variable production costs into the unit produced.

Difference between total and partially absorbent cost.

The total absorbent cost is absorbed independently of the used manufacturing capacity and the cost is partially absorbed proportionally to the used manufacturing capacity.

Variable or direct cost.

It is one whose magnitude fluctuates in direct reason to the changes registered in the volume of production or sale.

Marginal, incremental or differential cost.

This cost from the economic point of view is the increase in total costs resulting from the production or sale of an additional unit.

Imputed costs.

They do not appear in the accounting records and do NOT imply disbursement of money, they are recognized costs for analysis but not recognized in the accounting system.

Capacity costs.

They are those fixed costs resulting from a capacity provided in excess of the requirements in order to meet a certain possible demand for the future development of the manufacturing activity involved.

Avoidable or avoidable cost.

Represents the additional cost that will not be incurred if a certain plan or project is not undertaken.

Unavoidable cost.

They are those that it is necessary to incur to prevent machinery from suffering damage due to lack of maintenance, they are fixed costs that come from the possession of a good.

Temporary closing cost.

It is the set of expenditures that must be incurred when the decision is made to temporarily close a department. of production and / or service that is made up of the following points:

Dismantling costs Machinery maintenance costs Compensation costs paid Present financing value of reinstatement cost Cost of abandonment or final closure.

They are formed by the losses caused by the difference, by the book value of the fixed assets that are going to be permanently withdrawn and their net realization value, plus the cost of dismantling and compensation paid to the workers who work with them.

Expected future costs.

They can be defined as the costs that will be different according to the alternatives put into consideration. The relevant information is integrated with those expected future data that differ between the alternatives, its characteristics are:

They must be expected future costs. They must be different costs among the alternatives.

Non-relevant or irrelevant costs.

They are those future fixed costs that do not vary whatever the decision is made.

Expired costs.

Those who reach the results because no future benefit can be expected or because the future benefits are so doubtful that they are not susceptible to measurement, future benefit means: any of the following possibilities:

Obtaining an income relative to the corresponding investment.

Elimination of the recurrence of a new cost for the purpose for which the one already incurred is destined.

Unexpired costs.

They are those whose application to results is deferred because they are representative of potential service amounts available in future periods. These costs are carried to future periods as an asset.

Assets are economic resources destined for the purposes of the company, sums of potential services available, when an asset is no longer potentially available it should be eliminated from the accounts, the assets are costs withheld from the stream of expenses and appear on the balance sheet awaiting their expiration, so the lines of inventories and fixed assets represent them.

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As a complement to this document, on general aspects of cost accounting, the following introductory video-course is suggested, given by Professor Jorge Ignacio Lardizabal, through which basic concepts such as production costs, distribution costs are explained, variable costing and ABC costing, among others. (15 videos - 6 hours)

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