In accordance with what products are manufactured at a particular company, what are their volumes and technical characteristics of complexity, depending on the degree of complexity of the production and technological processes, certain methods of accounting for production costs are used. In modern analytical practice, the most commonly used in enterprises are the following.
A simple, or, as it is also called in the literature, single-method method is used in those types of production activity where work in progress is completely absent or its share is negligible. Examples of such industries and enterprises can be those that are engaged in coal mining.
The essence of this method is as follows: the cost of production is calculated by dividing all the total costs by the physical quantities of the manufactured products.
Practical methods for accounting for production costs include the custom method. It is most often used in enterprises of heavy engineering, because the object of accounting is one separate order, and such enterprises are classified as small-scale. The method is also quite common in the analysis of experimental design work, the production of which is single. When using this method to calculate the actual cost price, orders should include the amount planned for the production plan for the month. And in the production of large units, orders can be formed for the manufacture of their individual units. In contrast to what other methods of accounting for production costs suggest, with this method indirect costs should correspond to the distribution basis established by the enterprise. Its main characteristic is the determination of the cost of the fact that the order has been completed by dividing the cost by the value of the completed production order (in units of production).
The alternating method is used, as a rule, in enterprises of the light and food industries, for example, in the production of sausage products. Two main types of cost accounting are used - semi-finished and semi-finished. When using the first, the products of each production cycle are by and large a semi-finished product for the subsequent, and therefore can be used as the final product even before the completion of the production cycle. With this technique, the cost of semi-finished products, as the methods for accounting for production costs suggest, is reflected in a special article.
The normative method takes into account that the formation of costs for production at large-scale production enterprises differs significantly from those considered above, and therefore the accounting methodology here also has its differences. Firstly, this method is most effective for manufacturing enterprises where large-scale production exists (for example, the furniture industry). And secondly, the analysis of the estimated cost of production should be of the nature of monitoring, constantly taking into account the dynamics of deviations from the norms of costs adopted at the enterprise.
A distinctive feature is that it is necessary to differentiate the actual costs, and those that are defined by established standards. This is justified by the fact that any change in norms inevitably entails a change in the magnitude of costs.
At the same time, the normative method has some limitations that can be attributed to its shortcomings. So, if the general economic situation is unstable, then naturally, there can be no talk of any innovations and the introduction of advanced technologies. Consequently, there will also be no grounds for applying an effective regulatory method.
As you can see, any of the methods considered has its own analytical approaches to accounting for production and ways of cost allocation. The totality of these methods in the analysis is complemented by an assessment of work in progress.