Экономические науки/7. Учет и аудит

Candidate for a Master's degree Salivonik A.N.

Karaganda Economic University of Kazpotrebsoyuz, Republic of Kazakhstan

CHOICE OF METHOD COST CALCULATION

All company for effective and rational work must select the optimal method of cost calculation. A choice and order formation of prices on the company are not regulated, the calculation is made not for tax purposes and for internal aims of the company. The correct cost accounting in the organization plays a considerable role, because organization gets possibility of influence on the expenses of production, and thus the very organization as a whole.

Primary in the choice of calculation there is direction of account in an administrative account. Under the direction of accounting theory refers to activities or part is understood areas of activity in which you want to keep focused on the production of records. Simpler speaking, if user needs information about the cost of their specific management objectives, these objectives are the focus of accounting. In practice, depending on a specific of the industry and enterprise, excluding areas can be varied, as investigated in more detail, for example:

- It is an assortment of products;

- The possibility of complementary and alternative orders;

- It is pricing of products;

- The cost of stocks for management decisions;

- The cost of maintaining a particular department;

- Costing of certain goods.

All these brought directions over of account contain the necessary information about the cost of manufactured products in any enterprise. Therefore, determination of the choice of method cost one unit of output is currently difficult. Cost calculation - is a method of correct and accurate pricing on products in order to determine the efficiency and profitability of the company. Methods of calculation of production are determined depending on the method of reflection costs in the enterprise and their calculation. Cost accounting and cost calculation is based on any enterprise regardless of financial and tax accounting, as the choice of the method of cost calculation is determined by the management decisions of managers and company administration. Therefore, methods of cost accounting in the financial and management accounting can differ materially.

In international and national practice, using both traditional methods of calculation of the cost production and functional methods, presented in Table 1.

Table 1- Classification of cost methods calculation

Methods of cost calculation
Traditional methods	Functional methods
- Process costing - Standard costing - Job order costing - Normative costing - Direct costing - Absorption costing	- Activity Based system (ABC) - Just in time

Traditional systems of calculation work effectively where overhead support production processes represent a small proportion of the in direct costs. But to date, auxiliary production costs play a very important role in shaping and calculating the cost of production. Therefore, the functional systems of calculation oriented company for consideration of information that allows for the formation of value added industrial products. The main difference between traditional systems of functional systems of calculation is reduced to the different economic bases systems, namely the formation of the traditional methods do not account for the cost of the business activity , and functional fully take into account the level of business activity . The advantages of the functional methods calculation, compared with conventional systems, are:

- Standard evaluation (benchmarking);

- Strategic analysis and management of financial investments and pricing;

- Obtaining relevant information to make the right effectively - sound management decisions;

- Estimation of the costs on the basis of features that enhance the value of the product.

The disadvantages of functional systems of calculation include:

- Obsolete methods in connection with organizational changes;

- Information on the functions cost effectively underplayed;

- Hard - supported the process of describing cost functions.

Essence process costing calculation is batch or mass - produces of the same type (or approximately), the same quality and size of the products. Process costing used by companies where manufacturing technology requires a separate run certain parts of the process of production, that is, the production process is divided into regularly recurring transactions. The main feature of process costing is that together with the production process are accumulated production costs. Cost level increases with each completed the process of making products. The cost of products at process cost is calculated by dividing the total cost of the total output by the number of items for the period. To effectively determine the cost of each stage of manufacturing products in the enterprise open a sub-account for each individual treatment process. Process costing is the only method by which inappropriate to use analytical accounting calculation items. Basically process costing used in the textile, metallurgy, oil refining, food processing, chemical, glass and other industries. Since in this method is mainly dominated by calculating the chemical, physical and thermal treatment processes produce. The disadvantage of the method of process costing is the difficulty of assessing the value of work in progress, as the cost of work in progress is lower than that of the finished product. In this regard, the company need arises to transfer unfinished production of equivalent units of finished product.

Single standard cost system - cost the company a universal lever for management, planning and control of production costs. On the set, at the beginning of the reporting period, standards possible to determine the desired amount of production costs for manufacturing products. Also provided information on the standards identify undesirable deviations, in order to make operational decisions. Rationing costs for standard system - cost carried by cost: materials, direct labor and overhead costs for repayment of wages and other personnel. Standards are set per cost per finished product. Accounting standard in the system - cost is not regulated, so it does not have a unified methodology to establish standards. Emerging deviation between actual and standard costing for the years are going in separate accounts is not debited on account of production and financial results of the company. Deviation for a given system can be of four types: materials, wages, overhead charge and gross profit. Deviation is calculated based on three indicators in the context: for the price of materials, the number of the materials used and the cumulative deviation of material consumption. Variance analysis is calculated on the basis of labor: labor productivity, the rate of wages and the cumulative deviation of the labor costs. Variance overhead is of two kinds: deviation constant and variable costs. Deviation of gross profit is classified into: deviations selling price for sales volume and the cumulative deviation of the gross profit. The most important thing in the standard costing - is strict control of deviations and prompt surgical intervention when changes. If you do not keep conduct control, standard - costing will be ineffective. Scope of standard costing quite diverse: this enterprise with a non - product range, or an ad hoc production technology. It may also be used when introducing a new product form. System standard costing is one of the most used accounting systems throughout the world, especially in Western mills, with developed market economies.

The main feature of the job order costing is to determine the cost of one order, which originally defined the necessary level of industrial production. Individual characteristics of job order costing are: the use of special purpose equipment, nonrecurring individually handcrafted products, hand fabrication processes. The essence of this method is that all costs incurred relate to their place of their occurrence, and included in the cost allocation path according to the selected base distribution. Species of job order costing method are: special order costing, costing of party goods and costing contract. Costing special order determined by the order of the consumer per unit of output. An example would be: sewing coats, car assembly, and more. Calculation of cost contract is for a period of time of manufacture of a product or service, such as the torus or the floor for two months of the year. Costing contract is characterized by the length of time the manufacture of products or services, for example, two months or half a year torus. An example of the calculation of the contract is the construction of an ice palace. In order to improve control at contract manufacturer products can bill for a specific date, on the basis of their costs incurred. The specificity of this method is determined and scope - it is small-scale and individual production.

Activity based system (ABC) - calculation of the cost of the system is functional, and is used internationally. Differences of this system from the traditional - is its versatility. ABC system identifies activities (processes, operations) that cause the occurrence of costs and examine the main cost drivers for these activities. This system involves the classification of the main activities, the definition of the cost of each activity, as well as identifying drivers (media) costs. Method of calculation of the cost of production is a functional ABC method, as it implies the recognition of costs of the functions themselves to the final finished product. By this method, such rates are calculated distribution costs that relate to a specific function. Under the function is understood as a process that takes place at the company, such as retooling of production equipment; marketing activities, delivery of materials from the warehouse to the production equipment, logistics activities, etc. By the conditions of application of the ABC include:

- Provided that the production overheads are quite high compared to the direct costs, especially with the cost of direct labor;

- Large variety of manufactured products;

- A significant variety of overhead resources (indirect labor, indirect materials, etc.) used in the production process;

- Provided that the consumption of overhead resources are not directly dependent on the volume of production.

The ABC system is based on the fact that for each operation or activity has its own, quite accurate and inherent to it, the cost factor, changes in the terms of which affect the cost of function. Thus, the system monitors the ABC and applies causal relationships between cost drivers (allocation bases, databases) and expenditures, and rather than conditional relationship, as is common in traditional costing. The most attractive feature is its ABC individual customization for a specific company; you can use the ABC system in any field of activity. The functional ABC system allows obtaining more accurate values for the cost of production. However, the cost of implementing this system is far greater than when using traditional costing systems.

In the 1930-ies in the USSR on the basis of standard costing developed a normative method of cost accounting and cost calculation. The main differences between the standard costing and normative system accounting are as follows:

- Normative calculation begins with defining the standard cost carrier costs and ends with formation actual unit cost of production and the system standard costing is not related to the actual unit cost of manufactured products;

- System standard-fare is a collection of systems planning, forecasting and analysis of the costs incurred and normative calculation is a system of measurement for all actual costs;

- In the system standard costing used special accounts for cost accounting standards and their deviations, and at standard costing of accounting is used only one special account for the actual cost accounting differences from the normative;

- Using the standard costing identified species deviations much more than when compared with normative costing.

Normative method of calculation is determined based on the company developed, norms and deviations from these norms. Feature of this method is timely "signal" inefficient and unsustainable use of resources of the enterprise. Therefore the norms of the company should be systematically reviewed. The main characteristic of this method is to control the identified deviations. Deviations are substantially adverse and favorable. Favorable variances - those deviations which the actual cost exceeds the regulatory and adverse deviation, on the contrary, standard cost which exceeds the actual. The company, applying standard calculation determines the deviation variable and fixed costs. The variable cost variance analysis made: materials, salaries, and other overhead costs. In turn, deviations in the materials classified as low bias and bias materials by volume of the materials used. Deviations of wages are: deviation of labor productivity and wage rate. The complexity of the normative method of calculation is determine the causes of identified deviations. The production is a complex mechanism, so it causes malfunction can be varied: inadequate regulations, inefficient activity of the company, information about errors in evidence, as well as uncontrollable factors.

Specificity of direct costing is organize the separate account variable and fixed costs in order to use this information for the effective management of the organization in the field of production. Variable costs are included in the cost of production, and fixed costs are charged to the income statement. Feature direct costing is that costs are included and are scheduled only in the part of variable costs, and the constants are taken into account and going in separate accounts, for subsequent distribution in proportion to the financial result. In management reports of the companies, who used direct costing should be submitted two indicators: revenue and profit margin. It may be noted that direct costing is a method of controlling management in the enterprise, based on the true cost of production, and independent of fixed and overhead costs. On the basis of direct costing analyzed the ratio of "cost - volume - profit" (break-even analysis). The basis of this analysis is to find the neither point where the enterprise will neither profit nor loss. The breakeven point is a certain threshold of profitability, which characterizes this volume of products in which the cumulative cost equals revenue. Break-even analysis is a powerful tool for efficient planning and forecasting activities of the enterprise. With the development of management accounting system direct costing transformed into a system when the cost price is not only taking into account the direct variable costs, but also indirect variable costs. Important specific direct costing a systematic analysis between the volume of production, profit and costs incurred in the ordinary course of business. Currently, direct costing is widely used in Germany and Austria, this method sounds like a "partial cost accounting" or "keeping the amount of coverage", in the UK it is called "taking into account the marginal cost" in France - "margin accounting" or "margin account". Like all methods of calculation of direct costing have its difficulties. Costs can change their attitude to the volume of production during the year, while direct costing would not be appropriate. The disadvantages of the system include: displays overhead and fixed costs of control organization, not possible to determine the average cost that may entail the wrong pricing policy of the enterprise.

The essence of absorption costing is develop the most appropriate cost of production, as it assumes the distribution of the total and fixed and variable) costs between products sold and its residues. Companies applying full cost method of cost allocation believe that production is not possible if there are no fixed overhead costs, so they should be allocated to the unit cost and are included in the resource estimate. Basically absorption costing applies those enterprises that are involved in price competition. The advantages of the system absorption costing include: the relationship with financial accounting, in order to make external reporting; multivariate scope; possible to calculate the most cost-effective products , the ability to calculate the total cost of finished goods , work in process and inventory in stock. Deficiencies of absorption costing: the inability of the comparative cost analysis of different kinds of products, with a large range of products possible wrong choice distribution base, which would entail a distortion cost.

Just in time system is a special calculation system, which covers all aspects of the production activities of the enterprise. Companies using this system are: reduction of marriage, reducing congestion, increased flexibility, increased productivity, reduced production time, as well as improving the ability to provide new products into production, and improve existing products. Basically, the system Just in time used in serial production. This is a fairly simple inventory management system without any restriction to the minimum requirement of stocks in which flows of material resources carefully synchronized with the need for them, given by the production schedule of the finished product. Just in time system is more bound demand, rather than the traditional method of "throwing products to market". The basis of Just in time on the principles: the complete elimination of stocks in production, minimizing their warehouses and delivery of resources directly to jobs in small batches maneuverable transport; abandonment of production in large lots, supply production is carried out in small batches as needed , resulting in which achieves a reduction in inventory levels. Just in time method is based on the concept of logistics - "nothing will be made until this is not the need arises". The advantages of this system can get rid of: the extra costs by reducing unproductive expenditures, which consist, in particular, from the release of excessive production; downtime of equipment and personnel detention unnecessary storage space; losses associated with the presence of defects in products.

In addition to the methods of calculation and there are other methods of calculation, such as target costing and kaizen costing. Target product - costing is forecasted planned) cost improves the product in accordance with the target parameters. Set boundaries forecast future price and size of the profit rate products, based on which the search for materials, methods, technologies to find the necessary amount of costs. This calculation system is effective in combination with functional cost analysis.

Kaizen costing is a method of calculation, which is aimed at the gradual improvement of product quality, reducing costs and increasing profits of the enterprise. The term "kaizen" is borrowed from the Japanese economy and means constant and gradual improvement. The main purpose of kaizen costing is determined to minimize the difference between the estimated and the actual cost of the product by cost. Target costing aims to bring the cost of the product to the desired level in the process of its development, and system kaizen costing aims to develop individual cost items and the cost of the whole process of production. Both systems can be used in management accounting, as in the relationship, as well as independently. Typically, they are used in conjunction it. Projected calculation of the cost starts at target costing, and then calculation of (already actual costs) continues in the system kaizen costing. Together, the two systems give the company a very valuable competitive advantage in achieving lower than the competition, the level of costs and the opportunity to choose a convenient pricing to capture or retain appropriate market sectors.

Methods of classification approaches to calculation of the cost are independent, so a discussion regarding the method of calculation, which is better – process costing, standard costing or absorption costing - is a manifestation of misunderstanding the essence of these methods. In each case, a specific method is used, or a combination of at least three aspects. For example, a company that produces kitchen furniture to order, can be used as a job order costing, and calculation of the regulatory system and possibly direct costing. A company engaged in the manufacture of soft drinks - or absorption costing, process costing. Also ways of measuring the choice of method of cost calculation can affect not only the tradition of organizing credentials, but the credentials of the whole country tradition. The method of calculation under certain conditions of production involves a specific calculation method, or combination of some of them.

Effectively grounded and the optimal choice of cost accounting and calculation will allow any organization to maximize the profit of the company in view of the risks identified and to reduce production costs.

References:

1. C. Drury. Introduction to managerial and cost accounting. S.A. Tabalina. –Yuniti - Dana, 2012. -735 s.

2. Volkov O.N. Management accounting. -М: prospect, 2005. -472.

3. Kondrakov N.P. Accounting (financial, managerial) accounting. -М: prospect, 2006. -448 p.

4. A. Maslova management accounting overheads: applicability of the method the JIT (Just in time) and the FAA//management accounting. -2006. - №4. -S. 43-45.

5. Kachalay V.v. Kaizen costing: the Japanese approach to cost management in industrial enterprises of Ukraine//regional economy and management: electronic scientific journal. -2013. -No. 1 (33). -P. 53-58.