IT.UA - home page


Expenses and controlling

Operational production cost management

Manage your profits by controlling your costs online


The system allows to effectively solve problems

Reliable actual cost of monthly production

Daily cost calculation of the manufactured parts and assembly units

Control of the nomenclature and quantity of writte-off materials

Information on the value of work in progress at any time

Actual Cost Analysis

Operational control of production cost deviations in the production process

Indicators and alerts in cost management

Comparison of planned and actual production costs

Operational cost management in production is based on the procedure of identified cost center accounting and accounting by the technological procedure.

This method allows calculating costs based directly on the primary production document flow and eliminates the main disadvantage of traditional methods – parallel, unrelated quantitative accounting in production and cost accounting. At the same time, both, production (managerial) accounting and accounting shall merge into a single quantitative-value schedule for accounting and calculating the actual production costs.

The main costing stages of the aforesaid procedure are as follows.

Operation/process based production accounting: production of parts and assembly units/semi-finished product, transfer of parts and assembly units over the technological route from one division/work center to the other, reject reports, suppliers reject report, box splitting report, inventory counting balance and deviations etc.

The main document is the primary production document "Production output report" or "Expert’s report", where three types of accounting are combined:

  • production (quantitative) accounting of parts and assembly units/semi-finished products by each process operation/process
  • operational and business accounting of write-offs of raw materials and accessories used in the production for the specific parts and assembly units/semi-finished products
  • labor accounting in the form of calculating piece rate for products at time and price rates

The production output report shall be promptly generated within the production process; the fact of production shall be promptly registered therein together with the write-off for production:

  • the balance of raw materials, accessories available in the shop (shop area) at the moment of writing off at rates or on actual basis with the reference to the standards or replacement cards (technological change notices)
  • standard piecework remuneration

The calculated remuneration for output shall be further transferred to the “Piecework remuneration” module and does not require a separate orders closing, which is an extremely labor-intensive process.

Materials write-off. The specified raw materials and components shall be written-off from the balance in the workshop, and the cost thereof shall be transferred onto the produced semi-finished product, taking into account the written off amount.

Calculating costs on operations. All costs shall be classified by costing items, “linked” to the related parts and assembly units/semi-finished products produced at the specific process operation/process. The actual and planned costing shall be generated to the production output report for the following plan-fact analysis and actual costs accumulation.

Accumulation of previously incurred costs. The previously accumulated costs of previous process operations of the specific part and assembly unit / semi-finished product shall be added to the cost of the actual operation in the context of calculation items. In case of incoming parts and assembly units / semi-finished products available, the costs in the context of costing items of all incoming parts and assembly units / semi-finished products shall be transferred to the produced part and assembly unit / semi-finished product.

Transfer of costs onto the next operations. The further flow of parts and assembly units / semi-finished products in production shall be accompanied by accumulation of costs for the next operations with the transfer of value thereof over the whole process chain – from materials write-off to production and selling finished products.

Accounting of work in progress (WIP) at actual prime cost. Production output reports and handling notes for the flow of parts and assembly units / semi-finished products shall be recorded in production accounting in quantitative and monetary terms; the data on actual balance in the shops and in production warehouses shall be changed accordingly. The balance shall be accounted in quantitative and monetary terms according to costing items thereat.

Calculation of shop costs. After the workshop costs are accumulated (usually in the monthly mode), they shall be distributed over the cost centers for the entire production of each workshop.

Accounting of finished products and sale at actual prime cost. Upon delivery of products to the warehouse, all accumulated actual costs shall be transferred in the context of calculation items to the finished products account and the balance of finished products shall be calculated at actual prime cost. When products are shipped to the consumers, the actual prime cost shall be calculated by costing items.

Operational control of direct costs in production. The main effect of implementing this procedure shall be achieved at the stage of operational control of costs in production, as well as when analyzing the actual prime cost of products and analyzing the results and interpreting the reasons at the primary level of shop accounting. Operational cost control in production allows controlling the write-off of raw materials, components, accrual of standard piecework remuneration online.

The main tool for monitoring the operational write-off of materials, raw materials and components, operational replacements in production is a report, where all deviations in the context of costing items, consumption rates, prices for materials in the production units are recorded together with indicating the responsible persons who have generated the document.

Actual prime cost analysis

Analysis of the actual prime cost of the produced or sold products is a sequence of actions that establishes a relation between the resulting element based deviations and reasons thereof. The general analysis schedule is as follows:

  • generating actual costing for a random period (month, quarter, year, for the period on a progressive total)
  • generating planned costing for the actual output (sale), taking into account the planned structure and prices in the cost
  • stimate for prime cost analysis without taking into account any structural changes
  • element based comparison of planned and actual costs in the prime cost of products and determining products with significant deviations from the planned cost for each cost element (raw materials and components, components, salary, etc.)
  • generating actual products structure (product’s genealogical tree) with element based interpretation of costs and analysis of the reasons for deviations in the product cost

Actual prime cost

Costing procedures

When selecting the costing procedure at the enterprise, it is required to determine the goals and parameters of the costing specification and to compare them with the ability to implement and maintain appropriate organizational arrangements for collecting costs with a certain degree of detail.
Costing parameters:

Cost centers:

  • company (corporate group, holding)
  • enterprise
  • enterprise shop
  • shop area
  • work center or primary technological processing
  • process operation at the work center etc.

Cost areas — costing items

The system allows determining any number of costing items; this number shall be determined only by the reasonability of cost specification and the identity of costing items with the related items of the planned costing.

Cost sources – cost components:

  • raw and other materials
  • spare parts
  • accessories
  • transportation and procurement costs
  • payroll
  • amortization
  • other elements etc.

Costing objects:

  • products of the enterprise modified to an equivalent (e.g. a ton of rolled product, a ton of grain)
  • products group
  • a specific type (nomenclature) of products
  • production order, production expenses code by products type
  • production order per unit of product
  • semi-finished product or a part / assembly unit
  • process operation, etc.

Methods for accumulating costs for costing objects:

  • balance method by cost period
  • standard method – accumulation of costs by a standard, accounting and analysis of deviations
  • identified cost allocation to a costing object

Methods for cost allocation to a costing object:

  • cost allocation methods – for example, pro rata with the standards, pro rata with the costs of another period, pro rata with coefficients, pro rata with the allocation base selected
  • methods, not requiring cost allocation – for example, direct cost allocation to the orders, operations or other costing objects

Methods for collecting costs for costing object/products:

  • by technological procedure
  • by actual flow of semi-finished goods in production
  • direct cost allocation

Methods for grouping products’ costs:

  • costing detailed to semi-finished products
  • costing not detailed to semi-finished products

In such a manner, the costing procedure at the enterprise shall be defined as the combination of the above mentioned parameters and properties. Various procedures shall be applied at the industrial enterprises.

  • Costs cumulation method of costs and further distribution methods – for example, pro rata with the standards, with the costs of another period, with the coefficients, with the selected distribution base
  • The procedure of identified cost accounting by cost centers in compliance with the technological procedure of manufacturing each part and assembly unit of the product (semi-finished product) by calculation items
  • The procedure of direct allocation of costs to the orders
  • Normative method of cost accounting
  • Balance method of cost accounting with further allocation on the output
  • Special (industry based) methods

Several costing procedures may be applied in the IT-Enterprise system at the same time, for example, the "accounting" actual prime cost shall be calculated by costs cumulation method, and the management cost shall be calculated by the identified cost accounting method by cost centers.




of our system

Min deviation level of the actual cost from the planned (within 1% on real cases)

Automated actual cost generation as an integral result of the production process

Economists-statisticians transformation into active managers

Through product cost decoding: assembly, part, technical operation, material

Cost deviations control on the day they occur, when you can still affect the result

Still, have questions?

This solution usually goes in the package with others

The following components help to increase the efficiency of the decision

Get in touch

our business proposal
our business proposal
Fill the form