The control of expenses in any company that produces products or services is a fundamental element for economic control, both for economic planning and for measuring and comparing the results of the management it carries out.
For the management, knowledge of costs is essential, as well as the Basic Principles for recording, control and analysis of production expenses, seeking that they are faithful, timely and correspond to the general rules and guidelines, which must be adapted to the specific conditions of the companies to adapt the cost system to their needs.
This work was carried out in the Company for the Reconditioning and Commercialization of Cargo Handling Equipment (MONCAR), belonging to the Unecamoto Group of the Ministry of the Iron and Steel Industry (SIME), dedicated to the repair and commercialization of cargo handling equipment.
The general objective of this work is the design of procedures for the adequate recording of expenses and calculation of the production cost. To solve the general objective, we structure the work in two chapters:
Chapter I "Diagnosis of the company for the reconditioning and commercialization of equipment for handling loads MONCAR".
Chapter II "Design of procedures for recording expenses and calculating costs in the MONCAR company".
This research work will provide the MONCAR company with the necessary knowledge to keep an adequate record of expenses and calculation of costs, perfecting a documentation that allows regulating each of the elements and items that make up the cost-by-order system, allowing in the future the correct control of material, human and financial resources for an accepted decision making.
INTRODUCTION
The new style of management of the Institutional Economy that presupposes the Business Improvement, has created the bases so that the companies can develop in an organized way all the necessary transformations that allow achieving an economic, efficient and effective management.
The environment in which entities operate today is characterized by a greater need for continuous improvement and the necessary flexibility to adapt to changes, requiring an effort of creativity and innovation.
At present, many of the companies lack an adequate Cost System, this being a key factor in any business, which allows them to know the unit costs of the products or services they offer. This information should be a tool for decision making in the company and not a nuisance or burden for them.
Increasing efficiency is a requirement of the first order, however, together with this arduous struggle in itself, the complexity and imperatives of today's circumstances force us to take progressive, parallel and intertwined steps that, at the same time, contribute to maintaining the level of existence of the country, reducing the inefficiency that characterizes the bulk of the economy and, at the same time, reducing cost in the part of these that have conditions that allow to adjust the economic recovery on new bases, in accordance with the external trends that make it possible to ensure competitive, long-lasting and sustainable advantages.
The implementation of the foundations of Business Improvement imposes new management methods that allow greater efficiency through the rational use of material, financial and human resources, which implies the systematic reduction of the costs of the production of goods and services.
Currently there are entities that do not know the real unit cost of each production, which implies a lack of control of the resources and expenses allocated to the production process, hence the great importance of cost analysis in companies in our country.
This work was carried out in the Company for the Reconditioning and Commercialization of Cargo Handling Equipment (MONCAR), belonging to the Unecamoto Group of the Ministry of the Iron and Steel Industry (SIME), dedicated to the repair and commercialization of cargo handling equipment, the which currently does not have a Cost System that allows adequate control, recording and calculation of expenses for timely decision-making.
The general objective of this work is the design of procedures for the adequate recording of expenses and calculation of the cost of production in the entity under study.
Among the specific objectives are to determine the main problems existing in the current cost system of the entity and define the procedures for the proper recording of expenses and calculation of the cost of production.
The proposal presented for the MONCAR Company will allow the necessary knowledge to keep an adequate record of expenses and calculation of costs, perfecting a documentation that allows regulating each of the elements and items that make up the cost system by orders, achieving In a short term, the correct control of material, human and financial resources for correct decision-making.
Chapter 1 “Diagnosis of the MONCAR cargo handling equipment reconditioning and commercialization company.
In correspondence to business improvement, it is vital that Cuban companies manage to implement a Cost System. To do this, they must create certain minimum conditions, which will allow the results to be solid and permanent, such as:
a) Assign the task for the adaptation and implementation of the Cost System to a person who serves as a management instrument.
b) Assign the task to the personnel who will be dedicated to the control, recording and analysis of expenses with those planned, estimated costs, etc. to determine its efficiency and apply its results timely and appropriately.
c) Implement periods of analysis that make it mandatory for the evaluation of administrative economic management at various levels.
d) Encourage results, compliance in the implementation stage and subsequent monitoring of exploitation and utility.
Expenses should be recorded uniformly and when they occur so that they are reliable and effective when compared to regulated costs.
For the effective implementation of this system it is necessary to start at the base, in the production unit to consolidate a good information flow, so that the data that is controlled is reliable and accurate, for the recording and subsequent analysis of the actual and estimated results.
The information system must be established in the workshops, organizing the base, systematizing, establishing the working methods through the creation of conditions or previously implementing a manual of models to collect the information, establishing work habits that make the information system work. costs in each of the areas of each workshop, such as warehouses, transportation, service departments, etc.
In summary, it is considered necessary to take into account the aspects detailed below for an adequate implementation of a System of Costs for
Orders.
1. Determine the areas of responsibility.
2. Determine the direct and indirect production personnel.
3. Daily work report.
4. Control of the consumption of materials by work orders.
5. Returns of materials to the warehouse.
6. Report of finished production.
7. Implementation of the work or production order.
8. Transfer of work or production orders between areas.
9. Control of waste for sale.
These aspects can be grouped into three main groups:
Organizational aspects: Develop an organization plan for the different areas for the elaboration and implementation of the normative bases of consumption for the resources that require it.
Methodological aspects: Establishment of an adequate inventory control system for the recording and analysis of material costs, establishment of a method for controlling indirect costs and the actual time worked, preparation of methodological and specific standards for planning and control. maintenance work.
Aspects related to the operation of the system: Organization of the flow of information to be supplied to the accounting area. Preparation of expense budgets. Determination of actual expense reports compared to approved budgets and analysis of variations.
1.1 Characterization of the MONCAR company.
The work was developed in the company MONCAR, which is dedicated to the production and wholesale marketing of new and reconditioned cargo handling equipment, which are working in all sectors of the National Economy, participating decisively in the technological flow of important productions and programs of the Revolution.
MONCAR has a horizontal organizational structure, which can be seen in Annex No.1, which represents the flow of authority in a systematic way. The workforce in this entity is made up of 72 workers out of 83 approved by staff, whose characterization is summarized in Annex No. 2.
The organization of the productive activity and services of the Company is structured in three workshops. The production scheduling in the company is complex and atypical due to the technical conditions in which the equipment to be reconditioned can be received, and therefore more or less attention and resources are required to restore its technical parameters, as well as the level of complexity and diversity of the assistance requested by clients.
The forklift reconditioning and repair activities carried out by the company are differentiated depending on the technology used by the manufacturers of this equipment associated with the power unit, and may be from engines powered by diesel fuel or by electric propulsion engines.
The productions come from;
a) Customer equipment that is repaired as requested by them, delivered by the quality group with the Repair Offer made in sales.
b) MONCAR's own equipment from abroad, inventoried in the warehouse and delivered by it to the UEB Operations when they are going to be processed to be later marketed.
For the Forklift to pass through the different sections that correspond within the workshops when delivered by customers for repair, it is mandatory that the quality group inspect and verify that the equipment complies with the parameters established for its proper functioning.
The mechanism for repairing the aggregates that enter the workshop for technical assistance (gearboxes, motors, batteries, applicators and pallet trucks is established.
Each workshop is dedicated to various productions or services with its own technological characteristics and its process is unique, so this work focuses on the Diesel workshop, which is the one that brings the highest income to the company.
1.2 Description of the production process of the Diesel workshop
Upon entering the Diesel Forklift workshop, MONCAR's own equipment or customer equipment, the latter, through the technical assistance service, are received by the quality group in the Reception and Initial Defection section, proceeding to their defection, filling RMC 10-08-01 "Reception of Diesel Equipment", annex No.3, setting out in this the problems that the forklift presents and the work to be carried out according to customer specifications in the Repair Offer which is attached to RMC 10- 08-01.
Next, the Quality group delivers the forklift with a copy of the RMC 10-08-01 "Reception of Diesel Equipment" and the Offer of Products to the Operations Management or Production Department where the RMC 10-08- is made. 02 “Production Order”, annex No.4, this document only includes customer and equipment data, such as: the model, series and brand, as well as the parts and materials that are going to be extracted to make the work, the code of the same, who authorizes its extraction, the amount that is needed, who receives it and who delivers it and if there is any return to the warehouse of those already extracted. As can be seen, this Production Order model does not fulfill its function by not having reflected the expenses of the workforce or indirect production expenses.These documents will pass with the forklift throughout the process, forming part of the Technical file of the same and the original remains in the Quality group. Once the repair is carried out, the RMC 10-08-03 "Diesel Forklift Repair" is issued for the subsequent verification of the equipment, annex No.5 which reflects the different sections through which the equipment must have passed during the repair..
Among the sections are the Mechanics section, in which once the reception and initial defect are concluded, the equipment components (engine, box and aggregates) are dismantled, and each of the pieces is also properly scrubbed to A better handling, it is reconditioned either by replacing or improving the damaged part and finally we proceed to the assembly and assembly in the place that corresponds to each of the elements previously reviewed.
After checking the correct working condition of the forklift, it goes to the Electricity section. Later it goes to the Welding section where the necessary work will be carried out. With the finished product being welded, it goes to the painting section and at the end of this section and given the approval of the Quality group, it goes to the Final Finishing section.
Subsequently, the quality group carries out the final checks of the equipment, following the instructions and technical specifications of the Manufacturer's Manual for this activity. If the result is positive, it issues the RMC 10-08-04 "Certificate of Finished Production and Quality Agreement", annex No.6, going to the finished production warehouse.
In the engines section, both the repair of the forklift engines that are in the workshop and those that enter for technical assistance are carried out. When the engine of a forklift that is in the process of being repaired in the workshop is being repaired, the same RMC 10-08-02 "Production Order" of the equipment is used. In the case of engines that enter through Technical Assistance, it is received by the group of quality filling the RMC 10-08-07 "Reception of Engines", annex No.7, delivering a copy of the same to the Directorate of Operations where the RMC 10-08-02 "Production Order, said documents will transit with the engine during repair.
During the assembly and adjustment of the motor, the operator with the condition of Self-control and / or the representative of the Quality group verify the parameters required by the manufacturer, once the motor has been repaired, it is placed on the Test Bench and is inspected by the group of Quality using the RMV 08-10-08 "Motor Parameters", annex No.8, issuing the RMC 08-10-11 "Certificate of Finished Production and Concordance of the Quality of the aggregates". Annex No.9. And the same happens with forklift gearboxes.
In the case of equipment coming from abroad, they enter the workshop where certain works are carried out for their correct start-up, as well as specifications that the clients who will be the owners of these want in the future, among these works are: the change of tires, the change of the loading tower, etc.
For your better understanding, a diagram of the productive flow of the Diesel Forklift workshop is shown below.
Source: self made.
1.3 Analysis of Cost Centers.
The MONCAR company has different cost centers which are divided into direct and indirect production, such as:
Direct cost center: In which expenses that are direct to production are recorded and will be recorded in the account 700-Production in Process, among them are:
Indirect cost centers: In which the expenses of the activities that support production are recorded and that must be recorded in account 731-Indirect Production Expenses, among them we find:
As can be seen, the company does not have the cost centers correctly defined, instead it uses grouped expenses elements, which is unnecessary, since there is an analysis by elements and sub-elements.
1.4 Elements of expenditure.
Cost centers are analyzed by elements and sub-elements that are directly related and contribute to the calculation of the cost of a product. Below is a list of the elements and sub-elements that are most evident in the company.
1.5 Procedure carried out for recording expenses and calculating the cost.
The company does not currently have an automated cost system in place that allows for timely calculation and recording of expenses. It uses an automated system called BK-MIS, developed for the recording of economic events, in which there are subsystems such as:
• General Accounting
• Inventories
• Payroll
In the General Accounting subsystem, operations are carried out through vouchers and in the rest of the subsystems the different types of movements are described, such as: cancellations, transfers, additions, purchases, sales or productive inputs, which are later transferred to the subsystem of General Accounting in order to prepare a receipt.
The service provided by the company begins from the client's request that is drawn up by the Commercial Department through a purchase-sale or service contract where conditions are established that are accepted by both parties. Only in the Basic Economic Unit (UEB) of Operations are the Production Orders foliated and registered in the accounting system issued. The biller with the information provided by the dispatcher of the production of the necessary requirements to carry out the work requests the accounting department the price formation sheet where the sale price of the product is determined, calculated on the basis of 10% above of the cost price to proceed with the sale thereof.
The production dispatcher maintains a consecutive of the Production Orders with their respective invoice paid by the client, The Production Orders are duly registered and numbered in the Consecutive of Production Orders of the Warehouse Production Inventory System that is the entry of the equipment to the Accounting System of the company through the installed BK-MIS System.
The authorization for a Production Order to be opened in the inventory system is given only by the Director of the UEB. of Operations.
The Production Orders are kept with all the documentation attached and corresponding to their status.
When a production order is completed, the workshop manager prepares a finished production report endorsed by the quality group, which in turn serves as documentary protection for subsequent delivery to the finished products warehouse. This certificate of Finished Production, annex No.6, is made in 5 copies, one remains in the workshop where the production was developed, another goes to the production department, one to the warehouse, one to the commercial department and the last one to the economic department.
When there are productions in process at the end of the period, the workshop managers are obliged to inventory this production, which was registered with an order number. This will be made known to the production department and this in turn to the economy area, through a report of production in process according to cost centers.
1.5.1 Direct material
When the Production Order is opened to begin the repair of a forklift that is received by the warehouse, the workshop manager prepares a request for the subsequent extraction of the equipment. Once the equipment is delivered to the head of the workshop as appropriate, he extracts from the warehouse the parts and accessories necessary to start the production process, so the warehouse dispatcher prepares a Delivery or Return voucher with the list of these materials, this document primary reflects the product code, description, unit of measure, price and amount in both currencies, warehouse to which it is requested, person who dispatches it and the person who receives it, with their respective authorized signatures; it will be sent to the economy department to formalize the dispatch of raw materials and materials,as well as inputs, which serves to account for the expense of materials associated with production and analyzed by cost centers.
If there are returns, they are correctly clarified, signed in the Production Order, and the return voucher number noted on the side, as well as a copy of this attached.
1.5.2 Direct labor.
This expense is determined by the Human Resources department, which feeds on the information provided by the heads of workshops regarding the hours of work used by direct workers in production. The salary is determined based on a fixed hourly rate, so the hours actually worked in a production are not taken into account, calculating the same value for both the worker who works 8 hours and for the worker who works 3 hours, for What is noteworthy is that there is no real control of the hours actually worked in a production.
The fixed hourly rate is calculated by dividing the monthly salary by 190.6 hours. The payment of wages to workers is made biweekly.
There is also a stimulation system that is influenced by the general results of the company in each month.
The direct and indirect salary expense is recorded at the cost center level to account 731-Indirect Production Expenses.
We must point out that the procedure for recording direct labor expenditure is incorrect, that is, direct labor expenditure employed in production is wrongly recorded in account 731-Indirect Production Expenses
1.5.3 Indirect Production Expenses.
It is in account 731-Indirect Production Expenses where the company records the actual indirect production costs grouped by cost centers, which at the end of the period are closed and taken to account 700-Production in process
The company takes as a basis for the proration of Indirect Production Expenses the total cost of direct material, since they constitute a very considerable part of the total cost, assuming that the one with the highest cost of raw materials and materials is to which corresponds the highest indirect cost of production. This application rate is expressed as follows:
Application Rate = Indirect Production Expenses (GIP)
Total Direct Material Cost of Equipment
Therefore,
GIP = Application Rate * Total Direct Material Cost
1.6 Summary Sheet of Costs by Production Orders.
In this company there is a Summary Sheet of Costs for Production Orders prepared at the end of the month, which is identified by a summary of the orders that were opened to carry out the work, however the folio or consecutive number is not taken into account of the order related to the equipment being repaired. The aforementioned constitutes a deficiency since the series can be repeated and thus prevent the production cost that really corresponds to a specific order from being known. This sheet summarizes the raw materials and materials that are going to be the parts and accessories extracted from the warehouse through the Delivery or Return voucher, to be charged to said orders, it reflects the allocation of direct labor, through the fixed fee of the hours worked,which is fed by the payroll of direct workers to production, and will also reflect indirect production expenses that will be prorated by the aforementioned application rate
The Summary Sheet of Costs by Orders constitutes the main document in the company, which is broken down by cost centers and in both currencies as shown in Annex No. 10
This Summary Sheet reflects the cost elements charged to each order and is made up of the following columns:
1. Number of orders: This reflects the serial numbers of each equipment that is worked in each order.
2. Initial balance: It is the amount that comes from the submajor of real production in process of the previous period, recorded by the economic department.
3. Raw materials: It contains the costs of the materials for the production of the period in question.
4. Salary: It comprises the salaries earned by direct workers in production in each series.
5. Other direct expenses: Describes other expenses that may be incurred that are direct to the production process.
6. Indirect expenses: Details all expenses incurred indirectly during the period and that are prorated between the serial numbers of the orders.
7. Final balance: It is the result of the incorporation of all the expenses of the period to the initial balance.
8. Finished production: Reflects the production that was finished in the accounting period.
9. Production in process: It reflects the production that was in process at the end of the period, and it will be determined as follows:
Initial balance
+ Raw materials.
+ Salaries.
+ Other direct expenses.
+ Indirect expenses.
-Production finished at cost.
Final balance of production in process.
After having reached the value of what was left in production in process and having the information provided by the workshop manager about the finished production, both reflected in the summary sheet of the orders, the operation receipt is carried out where removes finished production from the account production in process
Once the balances of the Production in Process and Finished Production accounts have been reflected in the balance sheet, the cost of the production sold is calculated using a finished production worksheet, Annex 11, which contains the following columns:
- Series No.: The series numbers of the finished equipment appear.
- Initial Balance: Shows the balance of the finished production accumulated in both currencies from previous months that have not been sold.
- Completed in the month: Shows the production completed in the current month, which is fed from the information on the order summary sheet.
- Final Balance: Reflects the final balance of the finished production of both accumulated orders and those completed in the month.
- Production sold: Shows the costs in both currencies of the production that has been sold in the month. These data are fed by a report provided by the commercial area to the economic department on the sales made in the month.
- Finished production: Reflects the balance of the production that was finished and that could not be sold, a balance that must reflect the account 190-Finished production in the General Balance, being the balance with which this worksheet must start in the next month.
Once the total cost of sale is known, accounting proceeds to record said cost
The company works with real costs, so once the end of the month has arrived it is the moment where the cost of the finished and sold orders can be determined, which constitutes one of the fundamental disadvantages since the cost of the orders is not known. orders completed and sold until closing, and therefore not recorded in a timely manner.
1.7 Deficiencies found in the MONCAR company.
Among the main deficiencies of the company to carry out a cost system we find that:
1. The Production Order model does not truly fulfill its function, since it does not reflect the cost of labor, nor the indirect cost of production.
2. The time it really takes the worker to finish a piece of equipment is not reflected in the Production Orders.
3. They do not have an exact knowledge of the cost of distribution and sale of production because they include it within general and administrative expenses, these two elements being different that reflect different types of expenses.
4. They have poorly defined cost centers, using cost elements.
5. They do not carry out a true control of the hours worked.
6. The registration of the salary cost for production orders is not accounted for in the account that really corresponds.
7. The basis for calculating the application rate should be modified to seek lower costs.
8. In the Summary Sheet of Costs by Production Orders, work is done using as reference the serial numbers of the equipment, which can be repeated, and not with the consecutive number of production orders. This means that when assigning expenses it is not possible to clearly detail to which order it belongs.
9. The method currently used to record the expenses associated with each order does not allow complying with the accounting principle of timely recording of economic events, since the entire procedure for calculating costs can only be carried out when end of period.
As can be seen, MONCAR does not have an adequate cost system that allows for a timely analysis for its due control, so we consider it appropriate to make a proposal for the design of the procedures for recording expenses and calculating costs in the company..
Chapter 2 "Design of Procedures for the Registration of Expenses and Cost Calculation in the MONCAR company".
The Production Order will be the main document that we will use to control costs. It will help the company to determine the values of the different elements of the cost of a product and by cost centers, for which a Production Order model is proposed (see model manual), where the costs of the different elements that make it up.
The cost centers must be restructured, remaining as follows:
The following is the procedure for recording expenses and calculating the fundamental elements and items of cost, in accordance with the provisions of the general cost guidelines.
2.1 Control and registration of raw materials and direct materials.
Once the work of defection of a team is finished by the technical direction and informed to the production department, the latter proceeds to open a Production Order to which the necessary materials will be loaded. The workshop manager, through a request for materials to the warehouse, extracts them by means of a Delivery or Return voucher, which specifies the number of the order to which it will be charged. This voucher once passed to the inventory system will be charged to the corresponding production order and the responsible cost center.
The economic area, through its specialist, will make a daily summary of the direct materials extracted from the warehouse through the Delivery or Return vouchers issued by it for the dispatch of the materials of each production order, according to model No.2 shown in the model manual. With this model, the specialist will be able to control the voucher that was charged to each order as well as its amounts. Each voucher is posted and therefore the existence of each inventory material is lowered.
Together, the cost specialist in the economic area will carry out a worksheet at the end of each week (see model No.3 of the model manual), where the consumption of direct material associated with each production order is quantified, feeding the same from model No..two. This must be made up of three copies, one for the supervision and control department, another for the workshop and a final one that will remain in the economic department. At the end of this operation, the accounting record is made through the following entry:
2.2 Control and registration of direct labor.
It is the responsibility of the workshop manager to actually control the hours worked in a production order or other activity outside of it, through a summary model No.4, which is presented in the model manual, with which it can be controlled daily the hours that have actually been worked in each order and for each worker. This will be processed to the Human Resources department, which through a model that reflects the hourly rate, the cost center, the production orders and the salary reach a value that will be exported to each order, thus determining the cost of labor direct by order. (Observe model No.5, of the model manual).
The human resources management technician supported by model No.5, at the end of the period will send a copy to the specialist of the economic area who will subsequently carry out the accounting operation to record the salary by cost center belonging to each production order as shows in the following entry:
2.3 Control and registration of Indirect Production Expenses.
Total production overhead typically represents a significant portion of total manufacturing expenses. However, the line items related to indirect costs are generally not large compared to material and direct labor to production.
The characteristics of indirect production costs mean that they are controlled in a different way than materials and the workforce, taking into account the following elements that make it up for their analysis:
- Indirect materials.
- Fuel and energy
- Indirect salary.
- Contribution to social security.
- Tax on the use of labor force.
- Depreciation of tangible fixed assets.
- Other indirect expenses.
In order to be able to know the cost of an order at the time it is finished, we propose that the company work by the Normal Costing Method, where the indirect costs of production in the company will be distributed through a single predetermined application rate based on direct labor hours. This will be in a specified period of time and on an estimated basis according to budget data.
Here is how the Single Application Rate is determined:
Application rate = Budgeted Indirect Production Expenses (GIP)
Unique Estimated Direct Labor Hours (Hrs. MOD)
GIP = Hrs. MOD * Single application rate.
With this unique application rate and keeping a control of the hours of direct labor, which constitutes its base, it will be possible to analyze the efficiency and effectiveness in terms of the performance of the workers in the production process, with the aim of reducing the product costs.
Supported by the correct distribution through this single application rate, it is proposed to work with subaccounts that reflect costs 001-Real Costs, 002-Applied Costs, 003-Over-applied Costs and 004-Under-applied Costs in account 731-Indirect Production Expenses.
The cost specialist will record in the 700-Production in Process account the real direct expenses identified with each production order and the costs applied for indirect expenses using the predetermined application rate, which is reflected in the following entry:
Simultaneously during the The indirect expenses incurred (Real) are recorded in account 731-Indirect Production Expenses, which is illustrated below:
It is noteworthy that the example shows as credit Miscellaneous Accounts, which responds to the nature of the expense that is being accounted for, for example, if it corresponds to indirect material expense, it would be account 189-Inventory of Raw Materials and Materials.
Upon arrival at the end of the accounting period, account 731-Indirect Production Expenses is debited by the Applied Costs subaccount and is credited by the real cost subaccount, if a difference arises, this would be adjusted with the over-applied costs subaccounts if it is creditor or under-applied if is a debtor. The following entries show how the procedure would be:
In case of over-application.
In case of Subapplication.
At closing, it is necessary to make an adjustment entry for the over or subapplication that occurred and reflected in account 731-Indirect Production Expenses. To cancel the envelope or subapplication, considering that the company by indications of the agency must leave the accounts 700-Production in Process, 190-Finished Production and 810-Cost of Sale at real cost, it is necessary to establish a procedure for the distribution of the envelope or subapplication in correspondence to the destination of the production.
From the greater detail of the accounts 700-Production in Process, 190-Finished Production, 810-Cost of Sale and 731-Indirect Production Expenses subaccount 003-over-application and 004-subapplication, the balance of each is obtained, which constitutes the basis informative that allows the distribution of the envelope or subapplication.
Once the balances of these accounts are available, the sum of those that constitute the amount of the cost of all orders worked in the company during the month is carried out. Subsequently, the Specific Weight (PE) is determined, dividing the balance of each account by the value of the sum of the account balances. Following this, the Specific Weight will be multiplied by the envelope or subapplication, obtaining the portion to be adjusted to each account.
Below is a table as an example with numerical values where the above is reflected:
Once the adjustment corresponding to each account has been calculated, we proceed to make the entry:
2.4 Procedures for the Registration of Distribution and Sales Expenses.
The MONCAR company dedicated to the reconditioning and commercialization of cargo handling equipment needs to control and record the expenses incurred in the distribution and sale of the finished production independently, separating them into the different elements that comprise it:
819-Distribution Expenses and Sale.
Expenses incurred, related to activities subsequent to the completion of the production process, intended to guarantee the storage, delivery and distribution of the finished production, assumed by the entity and contained in the sale price, are recorded in these accounts. The balances of these accounts are canceled at the end of the year, against account 999-Result.
This account is debited for the materials used that are related to storage, sale of finished production, labor force and social security expenses and also for services received from third parties; for example:
This account is credited for the cancellation of its balance at the end of the accounting period and the return of goods to the warehouse, such as:
The following is the proposed Model Manual for control purposes for the cost calculation.
2.5 Models Manual.
Model No.1 Production Order.
Goals:
1. Keep track of the different elements that make up the cost of the product.
2. Provide accurate information on the quantities and amounts consumed.
1-Header:
• Symbol: Monogram of the entity.
• Name: Name of the Model.
• Order Number: Consecutive of the production orders.
• Cost Center: Where the order is processed.
• Date: Start date.
• Client: Name of the company to which the work will be carried out.
• Brand: Brand of the equipment that will be worked on the order.
• Model: Model of the equipment that will be worked on in the order.
• Serial number: Serial number of the equipment.
2-Body of the Model.
a-) Direct Material: Reflects the materials used in the order extracted from the warehouse through delivery vouchers.
• Date: Date on which the product was extracted.
• Code: Unique numbering of the materials.
• Description: Name of the material.
• Unit of measurement (UM): Nomenclature of the type of measurement.
• Quantity: Quantification of the material.
• Delivered by: Signature of the person in the warehouse who delivers the material.
• Received by: Signature of the person who receives the material.
• Returns to the warehouse: Quantity that is returned of the material.
• Received by Return: Signature of the person in the warehouse who receives the returned material.
• Amount in MN and CUC: Cost in both currencies of the material.
• Total: Shows the total cost of direct materials.
b-) Direct Labor: Reflects the direct labor force used in production.
• Date: Date the worker performs the work.
• Worker's code: Worker's number on the payroll.
• Name and Surname: Name and surname of the person who performs the work.
• Hours worked: Number of hours worked.
• Amount MN and CUC: Cost in both currencies of the workforce.
• Signature of conformity: Signature of the worker ratifying the data.
• Total: Shows the total cost of direct labor.
c-) Indirect Production Expenses: Reflects the indirect expenses that correspond to the order.
• Date: Date on which the indirect costs applied are assigned.
• Description: Description of the indirect elements.
• Unit of measurement (UM): Nomenclature of the type of measurement.
• Amount in MN and CUC: Cost in both currencies of indirect production expenses.
• Total: Total indirect production cost applied.
3- Model foot.
• Made by: Name and signature of the person who makes it in the production department.
• Reviewed by: Name and signature of the director of the company.
• Approved by: Name and signature of the economic director.
Model No.2 Daily summary of direct material consumption by production orders.
Objective: Keep a daily summary of the Delivery or Return Vouchers issued by the warehouse for the dispatch of raw materials and direct materials that are charged to the Production Orders.
1- Header
• Symbol: Monogram of the entity.
• Name: Name of the model.
• Day: Day it is done.
• Month: Month in which it is carried out.
• Year: Year in which you are working.
2- Body of the model.
• Production Order: This column reflects in its rows the consecutive orders worked on the day.
• Vouchers No: These columns reflect the number of vouchers and in their rows the amounts according to the type of currency.
• Total: Reflects the total cost of the vouchers in both currencies for each order. While the total in the last row reflects the total cost of each of the vouchers consumed on the day.
3- Model foot.
• Prepared by: Name of the specialist in the economic area.
• Signature: Signature of the specialist in the economic area.
• Approved by: Name of the director of the economic area.
• Signature: Signature of the director of the economic area.
Model No. 3 Monthly Summary of Direct Material Consumption by Production Orders.
Objective: To keep a monthly summary of the direct material for production orders based on the information that is collected in model No. 2.
1- Heading.
• Symbol: Monogram of the entity.
• Name: Name of the model.
• Month: Month in which you are working.
• Year: Year in which you are working.
2- Body of the model.
• Production Order: Reflects the consecutive number of orders worked in the month.
• Week: The number of weeks within the month and the values in both currencies of the materials belonging to each order will be detailed.
• Total: Reflects the total costs associated with each production order in the month in both currencies.
3- Model foot.
• Prepared by and signature: Name of the cost specialist of the economic area that makes the model and his signature.
• Approved by and signed: Name of the Economic Director and his signature.
Model No. 4 Daily Summary of Hours Worked in each Production Order per Worker.
Objective: To make a daily summary of the hours used by the workers in each production order, as well as in other activities, determining the productivity and the use of the working day.
1- Heading.
• Symbol: Monogram of the entity.
• Name: Name of the model.
• Cost center: Area in which production takes place.
• Brigade: Brigade to which the worker belongs.
• Worker: Name and Surname of the worker.
• Code: Number of the worker on the payroll.
• Month: Month in which you are working.
• Year: Year in which you are working.
2- Body of the model.
• Day: In its ranks it reflects the days worked.
• Production order No: Reflects the consecutive number of orders that have been worked in that month.
• Subtotal: Reflects the hours worked on the different days in all the orders.
• Other Activities: Reflects the hours used to carry out other activities.
• Total: Reflects the subtotal of hours plus the hours of other activities.
• Hours: The hours reflected in the last row are all of them for each production order.
3- Model foot.
• Prepared by: Name of the workshop manager.
• Signature: Signature of the workshop manager.
• Approved by: Name of the UBE director of operations.
• Signature: Signature of the UBE director of operations.
Model No.5 Monthly Salary Summary by Cost Centers and Production Orders.
Objective: To summarize monthly the expenditure of direct salaries by cost centers and production orders, feeding on the information provided by model No.4. This model is also made by the workshop manager and a copy is delivered to the Human Resources department and another copy to the cost specialist in the economic area.
1- Heading.
• Symbol: Monogram of the entity.
• Name: Name of the model.
• Cost center: Area in which production takes place.
• Month: Month in which you are working.
• Year: Year in which you are working.
2- Body of the model.
• Worker Code: It reflects the code that the worker receives in the entity's payroll.
• OP. No: It reflects in its columns the consecutive number of production orders made and in its rows the hours worked by each worker.
• Subtotal: Hours worked in all orders by each worker.
• Other Act: Hours worked in other activities.
• Hourly Rate: Hourly rate that corresponds to each worker according to their salary.
• Total: Total cost of labor used by each worker in all orders.
3- Model foot.
• Prepared by: Name of the workshop manager.
• Signature: Signature of the workshop manager.
• Approved by: Name of the UBE Director of Operations.
• Signature: Signature of the director of the UBE of Operations.
Conclusions
As a result of the research carried out at MONCAR, we can reach the following conclusions:
1. The company, given its characteristics, must use the Order Cost System.
2. There is a Production Order where only a breakdown of raw materials and materials is reflected.
3. The cost of labor is not adequately controlled or recorded.
4. Cost Centers are not correctly defined.
5. They lack procedures for the adequate control and calculation of the cost elements and items.
6. They do not have the possibility to know the production cost of a completed order until the closing of the accounting period, since the company uses the Real Costing Method.
7. Distribution and Selling Expenses are incorrectly included in the General and Administrative Expenses account.
recommendations
After the study carried out on the MONCAR company through this investigative work, a series of recommendations is proposed that will serve for the correct control of production costs and in turn contribute to support in decision-making:
1. The restructuring of the direct and indirect cost centers is proposed due to their importance when recording economic operations.
2. Due to the utility of knowing the cost of production of an order at the time it is completed, we propose that the company work with the Normal Costing Method, using a predetermined application rate and distributing the over or subapplication at the end of the month occurred to the Production in Process, Finished Production and Cost of Sale accounts, so that they are valued at real cost.
3. For the correct cost control, the proposed Models Manual should be taken into account as part of the Cost by Orders System.
4. Taking into account the vision and corporate purpose of the company MONCAR, it is convenient to work with the Distribution and Sales Expenses account due to the importance in the marketing and distribution activities of production.
Bibliography
• Polimeni Ralph S., Fabozzi Frank L. and Adelberg Arthur H.: “Cost Accounting, concepts and Applications for Managerial Decision Making”, Second Edition, Havana, 1991.
• Horngren Charles T.: “Cost Accounting ”, Second and fourth edition.
• Cuevas V. Carlos Fernando, Cost Accounting, "Management and Management Approach". Editorial Pretince Hall. Sedunda Edition. Colombia, 2001.
• Palenque Terry, Efraín. "System Analysis and Design", Havana, University of Havana, Faculty of Accounting and Finance, 1989.
• Gutiérrez Sifredo, Mara and Betancourt Arencibia Maykel. "Bases for the Design of a Cost System in the Heroic Viet Nam Plant", Diploma Work, School of Accounting and Finance, University of Havana, May 2006.
• Ministry of Finance and Prices. ”Joint Resolution No.1 of 2005”.
• General cost guidelines for Sime.
• Rocafort, A. and Ferrer, R. (1988), Practical introduction to business cost accounting. Ed. Miquel, Barcelona.
• Iglesias Sánchez, JL (1995), «Management Accounting. Your contribution to business decision making. VII Congress of AECA, Seville.
• Castillo Acosta, Antonio. Concepts and importance of cost. Editorial Ministry of Higher Education. Havana. 1979.
• Almaguer López, Rafael. "Electronic Consultant for the Accountant and the Auditor". DISAIC Consulting House.
• Delgado Garrido, Raquel. Methodology for the implementation or improvement of cost systems. Camaguey. 1987.
Internet pages visited:
• Http: // www.gestiopolis.com/
• http: // www.Geocities.com/
• http: // www.monografias.com/
• http: // www.google.com/
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