The Importance Of Controlling Costs

The Importance Of Controlling Costs

By Jorge Paulino Electrical Engineer Cost accounting is a powerful tool in planning and controlling the activities of a company, being an effective tool for analyzing the behavior of costs in making decisions and meet the requirements of accounting and company tax. It is essential to the perfect detail all costs, allowing the study of correlations between the level of activity, the volume produced and the costs and revenues in a given period, giving the manager an overview of the production performance and financial health of the company.

The definition of expenses, according to Hair and Graeml in his book Production Management (Industrial and Service Operations), is “whatever the cost and source of the application that has a counterpart, a recipe that produces a residual value which we call profit. “Also according to Hair and Graeml, we can classify the types of costs such as: The first cost: the cost is only understands raw materials (Including components) and labor consumed directly in manufacturing a particular product. CP = MP + MOD consumed (consumed = MP + MP EIMP costs – EFMP) Where: CP = MP = initial cost raw material EIMP = initial inventory of raw materials EFMP = ending inventory of raw material cost of transformation: the company is investing to transform raw materials into finished products and components. Represents labor and overhead costs of direct production. TC = GGF + MOD Where: CT = MOD processing cost of direct labor = GGF = manufacturing overhead cost of production, represents a period of time, cost of inputs used in the process of transforming raw materials and components into finished products. .

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