Cost of products - this is an extremely important indicator.He not only is fundamental when calculating the price of the product, but is one of the indicators of a successful business.Unreasonably high production costs indicates an inability to managers to allocate resources efficiently.Effective distribution of the control now requires constant work and find ways to reduce costs.Of great importance in this difficult matter is the classification of production costs.It allows you to determine the direction in which the manager will have to work to, other things being equal, reduce the cost of production and sale.
Of all the classifications considered the most complete classification of expenses on economic elements.According to this classification, are five main groups of costs: material costs, salaries, depreciation, costs of social needs and other costs.
Expense s \ n employees are essential in the production process.Despite the automation of the process, no human effort is impossible to create a
classification of costs on economic elements also includes another group of costs associated with the payment of the people - this is social spending.In this case, the company as it does his duty to the state on whose territory it operates.Today it is called the social responsibility of business.Social responsibility is mandatory and includes the contribution to pension funds, medical support, etc.Such payments are usually regulated rather complicated legislation.
On the other hand, the most simple group, which includes the classification of expenses on economic elements - is the material costs.This group includes all costs associated with the purchase of everything that is directly involved in the production process and changes in the course of his shape.Simply put, it is - raw materials such as milk, used in the manufacture of cheese.The only problem that exists here - is the efficient allocation of all available raw materials for all commodities.
The cost of facilities, which are also involved in the production process, but are in good condition for several cycles, using the depreciation is deducted.Imagine a road machine, which the company acquired for the production of parts for 10 years.Just calculate how much the cost of the machine gave her every detail, is quite difficult, so used to calculate the amortization of different ways, and some calculations are literally in the eye.
All that is not included in the above group, the classification of expenses on economic elements belong to the group "other".This could include the payment of insurance costs associated with marriage in the production, etc.
As you can see, the classification is considered quite complete and objective, but for a deeper analysis of the cost classification used in accounting for those.process, method included in the cost, and other factors.In any case, to control important to find weakness in the manufacturing process, so the choice of classification depends entirely on the situation.