Cost Management

Cost Management

Try to explain the difference between expense and cost by using an example of cooking Indomie with egg【The concept of work-in-progress as greater than the material and less than the product】


I bought a pack of eggs at the Food Hall in the nearby Summarecon Mall today for Rp.26,000 per pack of 10 and a box of Indomie for Rp.100,000, so I paid Rp.126,000 for today's shopping, for example, with my neighbors If you open an Indomie stall with eggs at Rp. 2,500 and sell one cup immediately after the opening, the cost of Indomie Rp. 2,500 + Egg Rp. 2,600 = Rp. 5,100.


Cost Management

Different costing methods for each business system


ERP systems such as Microsoft Dynamics and Sage Accpac, which are often introduced in Indonesia, adopt the continuous record method to automatically generate accounting journal when the production and input results are recorded.


Cost Management

Relationship between manufacturing cost and SGA (Selling and Generally Administrative Expenses)


Manufacturing cost is the cost of the product entered into the warehouse in the current month, variable cost is the productized portion of the material cost incurred in the current month among the material inventory at the beginning of the month and the material purchased in the current month, and fixed cost is the direct labor cost incurred in the current month and the manufacturing overhead cost incurred for the product.

Cost of sales is the cost of the products shipped during the current month out of the product inventory at the beginning of the month and the products that entered the warehouse during the current month.


Cost Management

How to correct a mistake in entering the results【Adjust the quantity in the inventory adjustment and correct the manufacturing cost in the accounting journal】


The difference between cost of production and cost of sales is the difference between the cost of a few minutes of product completed in the month or the cost of a few minutes of product shipped in the month.


Cost Management

Understand standard and actual costs in the same way


If the total average unit price of materials can be calculated by the cost management system, the material cost incurred in the current month, the manufacturing cost in the current month, and the cost of sales in the current month can be calculated by accumulating processing costs for each process using the cumulative method, which is necessary for creating P/L.
The manufacturing cost calculated by "inventory of work in progress at the beginning of the month + expenses incurred during the month - inventory of work in progress at the end of the month" can also be calculated by "total average unit price of input products x quantity of input products + own process processing cost", and the breakdown by cost item for each process becomes a cumulative method.

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Cost Management

Allocation rate for manufacturing overhead and direct labor costs


Direct labor costs should be prorated in proportion to time (manpower = efficiency), such as "how much per hour", while depreciation of buildings (manufacturing overhead costs) should be prorated according to production volume, such as "how much per piece". Since the criteria for prorating direct labor costs and manufacturing overhead costs are different, the prorating ratio is also differentiated as a wage rate and an allocation rate.


Cost Management

The Flow of Cost of Goods Manufactured


OK now that you've had a chance to look at the numbers, let's get right into them. Let's assume that we are all accountants for Morgana manufacturing company and that we manufacture high-quality furniture like tables etc.


Cost Management

Categories of product cost


OK let's assume in this example that Morgana manufacturing company produces tables. Product cost, all product cost can be categorized into three subgroups, direct material DM, direct labor DL, manufacturing / factory overhead, I use both the terms because some text books use factory overhead, and some text books use manufacturing overhead.


Cost Management

Work-in-process inventories and manufacturing costs when production performance spans more than one month【Direct material costs based on input performance, manufacturing costs based on manufacturing volume, and cost of sales based on shipment】


In business accounting, revenue (sales) and expenses (purchases) are recognized when a transaction occurs, whether on an inbound basis (shipping basis) or an acceptance basis, so the profit calculated by subtracting expenses from one month's revenue is not equal to the actual balance of cash and deposits. Even if the conditions are the same, the pressure to pay for material purchases at the end of the month (cash flow) will vary because the following conditions vary from company to company.


Cost Management

Inventory valuation method and timing of actual data entry【Purchase accounting by moving average method is based on the basis of incoming orders】


In the trifurcation method, the cost of goods sold is calculated by unconditionally posting the cost of goods sold to the purchase account at the time of purchase, transferring the beginning of the month to the end of the month, and transferring each contra account (opening stock and closing stock) and purchase account to the cost of goods sold at the end of the month. However, in Indonesia, it seems that in many cases, the amount consumed at the end of the month (the amount sold) is transferred to the manufacturing cost (cost of sales) calculated based on the standard cost, which is recorded in asset accounts (materials and goods) at the time of purchase.


Cost Management

Accrual costs based on actual production and actual input in the cost management system【Accrual costs based on input volume are the cost of production in process】


If there are only material inputs and no material inputs, then the cost incurred during the month is also zero, and the cost incurred during the month is defined as "cost of materials input during the month = cost incurred on an input basis". If there is no production, then the manufacturing cost is also zero and the manufacturing cost is "the cost of materials with production volume in the month = the cost of actual production in the month". If there are no sales, the cost of sales is also zero and the cost of sales is "Cost of goods sold in the month = Cost of goods shipped in the month = Cost incurred in the month based on actual shipment.


Cost Management

Relationship between current month's expenses and cost of production of work in progress【To include work in progress in the B/S, it is necessary to allocate processing costs to work in progress】


When I first started studying costing, it took me a long time to understand that manufacturing cost is a manufacturing cost of a product.


Cost Management

The question of whether fixed costs should be imposed on products only or on work in progress


In Indonesian, the word mutasi means to "move" such as movement or change, which is an alien word from the English word mutation, and this mutasi can be broadly divided into Goods Receive, Goods Issue, Movement, and Inventory Transfer. (Transfer).


Cost Management

The impact of loss expenses on the cost of production


In case the production control system shows "10 good products and 2 defective products", the quantity of work in process or product in progress is 12 pieces, and the direct material cost and processing cost for 2 defective products have already been incurred.


Cost Management

Effect of payouts on the cost of sales portion of the P/L


In other words, whether the cost of goods sold is determined by deducting inventory at the end of the month (deducting inventory results) or by continuously updating the cost of goods sold at the time of shipment, the cost of goods sold on the P/L can be expressed as follows.


Cost Management

Cost of Sales and Periodic Cost


All SG&A expenses are expensed in the month in which they are incurred, but the cost of product manufacturing is expensed (cost of sales) only for what is sold at the time of shipment or at the end of the month, and the remainder becomes inventory at the end of the month as an asset.


Cost Management

What does it mean to deduct from the cost of production or the cost of sales in the transfer to another account?


It is the same as depreciation and allowance for doubtful accounts that when a material failure or loss (a loss after it has become a work in process) occurs, the work in process (or manufacturing costs such as material or processing costs) is not reduced directly, but indirectly transferred to another account through a transfer to another account.


Cost Management

Total average unit cost of input items and own-process processing cost, which are necessary for calculating the accumulation of production costs


The manufacturing cost is calculated by dividing the cost of products into three parts: "work-in-process at the beginning of the month + manufacturing cost of the month - work-in-process at the end of the month," which is called rolling costing.


Cost Management

How many minutes per piece is the man-hour, how much per hour is the wage rate


The relationship between the number of man-hours (how many minutes per piece) and the wage rate (how much per hour) used to be based on an agreement between the orderer and the subcontractor and the wage payment = standard man-hours x standard wage rate, but now it seems to have a stronger meaning as a management indicator.


Cost Management

Marginal Profit and Breakeven Point Learned from Boutique Management Experience in Bali


Until 8 years ago, I had boutiques at Ramayana Mall in Denpasar, Bali and Danau Tamblingan Street in Sanur, Bali, and my strategy was to run a time machine to take advantage of the fact that "Jakarta's trends come to Bali 3 months late".