Friday, 28 April 2017

What is Production Cost?

production cost

A Production cost refers to the total sum of money needed for the production of a particular quantity of output.
As it known that the condition of our country that the prolonged monetary crisis hit, so that for private companies require precision in manage it so that continuous activity, meaning that it can give an idea of the State of a company.

Usually the financial picture at any given period is reported in a financial report as the end product of an activity accounting. Financial statements balance sheet usually in the form as well as the calculation of profit loss, in addition there are also reports earnings that are being held within a certain period.

In the process of development of the industrial plant, then the required information-enough information to be able to manage the firm well. In between various kinds of information, then the issue of costs should be noted and factory overhead cost in the data obtained through the cost-accounting system.

Determination of the cost of production

The determination of the cost of production is the cost accounting assignment should follow the physical flow of production, then set the recording and analysis of information, the learning cost effectively and efficiently. During the production process takes place the costs that occur include:

  1. Material costs of raw
  2. Labor costs
  3. The factory overhead costs
  4. Auxiliary material cost 

Further, to note in the determination of the cost of production i.e. whether all costs is the cost of production has been noted in particular the factory overhead costs. In connection with this the first step to do is to gather information from the resource costs ( raw, direct wages, factory overhead costs) and then charge these costs to a good product still in process as well as the finished product. Then to find out the magnitude of the direct labor wages can be seen from the amount of time workers work With make a salary according to the job card can be known how direct a wage period.

The factory overhead costs

A complicated problem happens in terms of factory overhead costs because in addition to the number of its kind many difficult followed in his footsteps. Then it is very important to determine how the magnitude of the cost of the product at any time. Factory overhead costs cannot be charged directly against each unit of production, when the cost is not clear source.

Then there are three stages that must be performed to calculate the price of factory overhead costs including:

  1. Drawing up the budget of factory overhead costs
  2. Select the basic loading
  3. Calculate the price of factory overhead costs

The base can be used as a basis for the imposition of a factory overhead costs to products is a unit of the product, cost of materials for the raw, the cost of direct labor hours, direct and working hours of the machine. After the price of the overhead costs specified products are manufactured in the fiscal year of factory overhead costs saddled with that rate. In the fiscal year the factory overhead costs are collected in the true case.

Analyzing costs

At the end of the year, factory overhead costs are burdened right to products based on rates as compared to the really is factory overhead costs occur, then the analysis into four kinds of difference. The difference at the end of the year as necessary adjustment towards the accounts inventory and cost of goods sold or required as adjustments to the calculation of the loss of profit.

Allocate factory overhead costs are in the process of production, then the entire amount of which is used in the production process so that it can produce the goods, if the production costs here are usually two terbagi9, namely, fixed and variable costs, so there are grouping a number of costs to ease in the calculations

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