COSTING

I just wonder how many people really concern about "costing".

Normally factory or those involve in production and construction very concern about "costing".

My experience in costing was when I was a Cost Accountant in foreign-based multinational company.

Basic costing elements are Raw Materials Cost, Packaging Materials Cost, Direct Labor and Direct Overhead which resulted in a Production Cost. I will not touch on other Indirect Costs.

Raw Materials and Packaging Materials Costs are taken based on its issuance from the store or warehouse. The storekeeper normally records each time the materials were recieved in terms of qauntity and price.

The question here is, if under certain circumstances the value or price varies from time to time due to foreign exchange how does it takes into account. It has been in practice that it is determined by LIFO (last in first out) or LILO (last in last out) or average cost.

If the item is identifiable or countable physically its a lot more easier compared to if it is in the form of liquid in a drum. I realised the inconsistency in using the calculation methods resulted in a very high variance or discrepancy repot.

Usually the drum has a Gross Weight and Net Weight printed outside the drum. There are 2 possibilities of ignorant or negligent in establishing the actual issues or consumptions of the liquid for the production.

If a standard empty drum weight is taken as a basis to deduct from the "balance" drum weight at a cut-off date (last day of the month) as a Closing Date, definitely will result in high discrepancy. This happen when it is determined by just looking at the Stock/Inventory Cards.
If a little extra effort is taken by recording the actual empty drum weight, the actual consumption of the materials can be established more accurately. The worst thing that happen when it is deermined by "dipping" a measuring stick inside the drum and multiply by a conversion rate. This will result in a tremendous variance or high discrepancy. At the end of the day the "Production Staffs" were made accountable for this discrepancy. To certain extreme they were penalised but in actual fact it is because of the wrong "applications" in establishing the month-end or closing stock figures.

The end result would be the cost is registered incorrectly and the selling price is deemed to be set higher than it should be. The customers have to pay for the price that it should not be.