Elements of Accounting and Inventory in Manufacturing

In the review of cost accounting, is almost certain that you will find a conception of manufacturing accounting. Because indeed so, the production process is undertaken by manufacturing firms is more complicated and complex than the main activities of trading companies, then the most references that discuss accounting fees often also include a discussion of accounting in manufacturing as an example and as an object of discussion itself.

The existence of manufacturing accounting is quite important in the process of report preparation manufacturing (Manufacturing Report). Manufacturing report itself is a report that includes the costs of manufacturing cost elements of three manufacturing inventory.

Three Elements of Manufacturing Costs
Costs incurred in operating the plant or production costs can be classified into three elements. These three elements are as follows:

1. Raw Material Cost
All costs are sacrificed to obtain raw materials included in this category. However, what is meant by raw materials are materials that can be identified as part of the finished material.

Raw materials must be physically able to be traced in a simple and economical. While all sorts of costs incurred to obtain material for raw materials other than those included in the category of factory overhead costs.

Such as in the furniture company, then the raw material is wood. While the nail and glue referred to as equipment or raw materials indirectly. To further the costs contained in the equipment are included in the calculation of factory overhead.

2. Direct labor costs
Direct labor costs are the costs to hire or hire employees who work directly in the processing of the product. In other words, direct labor is all labor that can be traced to the finished goods in the production process as well as physically with an economical way. Examples are machine operators and workers who directly handle the operation of the plant.

As for the salary or wages paid to guard piggledy, security guards, and clerks are categorized in factory overhead costs. Because it is impossible and uneconomical to trace their contribution in every product manufactured.

3. Factory Overhead Cost
Factory overhead costs are often referred to as indirect production costs, production expenses, overhead costs of production, and manufacturing cost of the plant material. Factory overhead costs are defined as costs associated with the production process but not included in the cost of raw materials and direct labor costs.

Factory overhead costs can be classified into two subklasifikas return, namely the variable factory overhead and fixed factory overhead. Or variable factory overhead Variable factory overhead includes electricity, energy, raw materials or equipment not directly, and most of the indirect wages.

While the fixed factory overhead or fixed factory overhead includes the salaries of the supervisor, panyusutan machinery and building, insurance, rent, and so forth. From the explanation, it appears that wages are paid based on production processes included in the variable factory overhead. While the salaries paid each month continuously categorized into fixed factory overhead.

Three Inventory Manufacturing
The next three manufacturing cost elements are grouped into three manufacturing inventory, namely:

- Inventory of raw materials. This shows the costs of raw materials and equipment that have not entered into the production process.

- Inventory of goods in process. This refers to all expenses incurred in the workmanship of products not yet complete as the balance sheet date of manufacture. Inventory of goods in process arises when an accountant preparing the balance sheet of a manufacturing company, but there is still an unfinished product workmanship.

- Inventory of finished goods. It shows all the costs are sacrificed to produce a complete product, but not yet ready to sell when the balance compiled.