Process Cost Calculation

This time we will discuss about the accumulation of process cost calculations, production flow of raw materials as well as labor and overhead, Happy reading …

Table of contents :

  • Cost Calculation and Cost Accumulation System
  • Production process
    • Routing
    • Scheduling
    • Dispatching
    • Follow-up
  • Raw material
  • Labor costs
  • Factory Overhead Costs
    • Share this:

Cost Calculation and Cost Accumulation System

  • Prepares cost of goods sold reports for manufacturing companies
  • Prepare financial reports for manufacturing companies
  • State what the different types of fee systems are
  • Shows how each system measures costs and what cost elements will be included as product costs in any particular system
  • Distinguish between custom cost calculation systems and process based calculation systems

Production process

It is the activity of creating, changing and adding value to an item. The production process planning is:

  1. Preparation process
    2. Idea screening
    3. Idea analysis
    4. Product process experiment
    5. Production trial
    6. Product commercial

The nature of the production process which includes:

  1. The continuous
    production process 2. The production process is intermittent or also intermittent

The requirements that must be met so that the production process will run in a tub are:

  1. There are work procedures in the production system
    2. The layout of the production system equipment
    3. The layout of the production process
    4. There are types and materials to be produced
    5. There are employees who can work on the production process

data procedures for determining the process of production of goods and services consist of:

a. Routing

namely determining and also determining the sequence of the production process or raw material until it becomes the final product.

b. Scheduling

Namely what determines or determines the schedule for the production operation process that is identified as a unit.


Also Read:   Understanding CSR (Corporate Social Responsibility)


c. Dispatching

Namely determining and determining the process where giving orders to start the production process operations that have been planned in routing and scheduling.

d. Follow-up

Namely determining and determining various activities so that there will be no delays and also encouraging the coordination of all production planning.

Raw material (direct material) is a material that will form a comprehensive part of the finished product. This raw material can be clarified with certain products or orders with a relatively large value.

for example in a furniture company, the raw material is wood or rattan. Costs that will arise due to the use of raw materials are called raw material costs.

Raw material

Auxiliary raw material (indirect material) is a material that can be used in the production process which cannot be identified with the finished product and also has a relatively very small value.

for example : in a furniture company, the supporting raw material is finishing oil. Costs that will be incurred due to the use of supporting raw materials are often referred to as costs of supporting raw materials. The cost of supporting raw materials is part of the factory overhead cost element.

Labor costs

In accounting, this labor cost will be divided into 2, namely direct and indirect labor costs.

Direct labor costs are broadly categorized as people who directly process raw materials or are directly involved in a production process. For example, such as tailors in garment factories, cigarette rollers in cigarette factories, and so on

Meanwhile, indirect labor costs are the costs incurred to be able to pay for everyone who has worked, but will not be directly involved with the production process.

In a company not everyone can be involved in the production process. There are other staff who can help run the company.

For example, namely: payments for security staff, administrative staff, or other staff staff who will not be involved in a production activity.

Factory Overhead Costs

Overhead costs are unexpected costs that are not included in the cost of raw materials and labor costs. for example factory overhead costs, namely the cost of maintaining a machine when it breaks, machine depreciation costs, and also work equipment costs.

Factory overhead will also usually be budgeted by the company, excluding raw material costs and labor costs.


Leave a Comment