Expenses incurred during the month in the accounting system are "greater than or equal to material costs and less than production costs".
Since the ultimate goal of the accounting system is to create P/L and B/S, it is not equipped with an item master.
- Material inventory at the beginning of the month + materials purchased during the month - incurred material costs (work in progress) = material inventory at the end of the month
- Inventory of work-in-process at the beginning of the month + (material cost incurred + processing cost incurred) - manufacturing cost (made into a product) = inventory of work-in-process at the end of the month
In accounting terms, when materials are used, they become material cost, of which the portion that becomes a product is posted as manufacturing cost in P/L and the portion that cannot become a product is posted as a work-in-process inventory at the end of the month in B/S. In other words, the incurred cost in the accounting system is "more than material cost but less than manufacturing cost", and all of them correspond to the incurred cost to manufacture a product in progress.
In other words, incurred cost in the accounting system is a sum of "more than the material cost and less than the manufacturing cost", and all of them correspond to the incurred cost to manufacture the work in progress.
Current month's expenses based on actual production in the cost management system
However, the cost control system calculates the incurred cost for each work-in-process item by "gross average unit cost of input product x input quantity + own process processing cost", and stores the incurred cost and gross average unit cost for each item by cost category (direct material cost, direct labor cost, and manufacturing overhead cost) as a result of cost calculation.
- Material inventory at the beginning of the month + materials purchased during the month - incurred material cost (work in process 1) = material inventory at the end of the month
- Work-in-process 1 inventory at the beginning of the month + (material cost incurred + processing cost incurred) - work-in-process 2 manufacturing cost (work-in-process 2) = work-in-process 1 inventory at the end of the month
- 2 inventories of work-in-process at the beginning of the month + 2 manufacturing costs of work-in-process - manufacturing costs (amount made into products) = 2 inventories of work-in-process at the end of the month
The cost incurred in the current month, which is managed by the cost control system by item, is the cost of production in progress, and if the item happens to be a product, it is a manufacturing cost, and these are cumulative amounts calculated from the first process to the next.
Current month's expenses based on actual cost management system input
However, in the cost management system, it means the cost of manufacturing a work in progress by item code of a work in progress.
When there is a composition table of "Work in process 1 -> Work in process 2 -> Product", the cost incurred in each process is managed by cost category.
- First process: material and processing cost 1 ⇒ Work in progress 1
- Next process: Processing cost 2 is incurred ⇒ Work in process 1 is piled up to become work in process 2.
- Final process: Processing cost 3 is incurred ⇒ Work in process 2 is piled up to become a product
In order to create a list of costs by item in the composition table unit, it is necessary to control the costs incurred by the process unit by item.
Table that holds the calculation results of the cost management system
Accrual costs based on actual production are the cost of work in process or product, and accrual costs based on actual input are the current month's accrual costs, and the current month's accrual costs may not necessarily be the cost of production and may remain as month-end work-in-process inventory.
The table that stores items with inventory and purchase (production) quantity at the beginning of the month as level 0 and the table that stores the cost by cost item will generate a list of cost items (based on actual production), and the table that stores the input quantity at level 1 or lower, which includes level 0, and the table that stores the cost by cost item will generate the composition details of the list of cost items (based on input results).