How to calculate production costs

The production cost of the enterprise’s products is the sum of the costs of production, including the cost of semi-finished products, purchased products and services of other organizations, as well as the costs of managing and servicing the production. The production cost includes the costs associated with the manufacture of products and its delivery to the warehouse.

Instruction manual

1

When calculating production costs, they resort to calculation. This is a system of economic calculations of cost, the most important process of production management, which is the final stage of accounting for costs of production and sales.

2

There are several calculation methods. A simple direct method is used in enterprises of the manufacturing and non-material sphere, where products of the same type are produced, stocks of semi-finished products, as well as stocks of finished products, do not arise in large quantities. The essence of this method is that the object of accounting coincides with the object for which the cost is calculated. The production cost in this case is determined as follows: PS = PMZ + PTZ + OPR, where PMZ is direct material costs, PTZ is direct labor costs, ODA is the general production costs of the organization. The cost of an individual unit of production is calculated as the ratio of the cost of production to the volume of output.

3

A simple two-stage calculation method is used at enterprises where cost accounting is carried out at their places of origin. It makes it possible to determine inventories and finished products at production costs and assign management costs in full to the number of manufactured products. In this case, the cost price is calculated as follows: - the production cost of a unit of production is determined equal to the ratio of all costs to the number of manufactured products;

- determines the ratio of the amount of management expenses to the volume of production;

- the unit cost of production is determined as the sum of the two previous relationships.

4

A custom costing method is used to make a specific order. The cost of the order with this method includes several components (simpler products). The custom method is used in construction, sewing, etc.

5

In the alternate method, the cost is calculated for each production site (redistribution). At the same time, costs are not taken into account by type of product, but by the stages of production.