The cost of production of an enterprise, in fact, represents the entire amount of direct costs that are directly related to production, as well as all costs of creating and selling products.
The cost of production includes direct costs for materials, salaries and variable costs in the form of material costs, depreciation of fixed assets, salaries of fixed and auxiliary personnel, as well as overheads arising from the need for production and sales of products.
There are such types of costs as full and production.
The cost of production is one of the most significant and important indicators of the company. It is used in financial planning in order to calculate profits, as well as the profitability of different types of products and total sales.
The full cost of all products planned for release is reflected in the estimated costs of production costs and product sales. In this case, the total cost differs from the cost of sales. The difference that exists between these indicators is due to the fact that there are residues of a portion of unsold products that remain at the beginning (end) of the intended period.
If the proceeds from the sale appear upon receipt of funds at the manufacturer’s account (or at the cash desk of the enterprise), then the balances of products that were not sold at the beginning of the period include funds in settlements, goods in storage and finished goods in stock.
To determine the total cost, these balances are recorded at the production cost for the reporting period in the amount of their actual availability.
The cost of production of the enterprise in monetary terms expresses the costs of the enterprise for the production of products. Therefore, they distinguish between the planned and actual costs.
When calculating the planned cost, it includes the maximum possible costs that are provided for by the plan. The actual cost of production corresponds to the size of the funds actually spent on output.
The profit of an enterprise depends not only on the quality of technologies and industrial processes, product excellence and the effectiveness of managing production processes, but also on controlling the level of costs. Therefore, accounting for the cost of production is in the center of attention of representatives of all accounting schools.
The development of the economy as a whole is determined by the development of its individual links - industrial enterprises. Their work and efficiency is determined by management activities, thanks to which the company receives economic independence and a competitive position among other market entities.
The effectiveness of cost management is especially relevant in the context of the need to adapt to fairly rapidly changing environmental conditions.
The very concept of "cost management" today is not yet very widespread, since more attention is paid to the calculation and accounting aspects.
Under the management of production costs understand the process of its continuous accounting, planning, analysis and control, as a result of which management decisions are developed aimed at optimizing and reducing costs.
Cost management includes a system of measures to influence certain aspects of the enterprise in order to increase its efficiency and maximize profits. The management process consists of the functions of planning, motivation, organization and control. These management functions are combined by communication processes, as well as the adoption of common decisions.