Production activities of any company associated with the implementation of the various costs. They are an indicator of past and future abilities of the involvement of economic resources in all production processes to achieve the ultimate goal. One of the main types of costs – the material costs. Planning – is the process of setting goals for the entire organization and its individual units. The goals were set in the form of production tasks and provision of funds for their implementation.
Material costs are the largest element in production costs, the proportion of which is often up to 90% of the total costs. The smallest share of these expenses was observed only in the extractive industries. Material costs are very heterogeneous. They include the costs of materials and raw materials (with the exception of returnable waste). In their cost include the brokerage and mediation services, commissions. The cost of materials is included in the cost without VAT.
Material costs include:
- purchased materials, raw materials;
services and work performed by outside organizations or structural divisions of the enterprise;
- semi-finished products and various components requiring further processing (to purchase the semi-finished products include raw materials and materials, which took place some stages of processing, but were not finished products);
- natural minerals and resources in part made deductions for exploration costs, and reclamation works;
- purchased fuel used in the process, and for industrial and energy needs of the company;
- loss of wealth (according to the norms of natural loss).
In production all raw materials are dispensed only in accordance with the company mentioned above. Monthly on the basis of production programs and standards for each product and the shop (division) calculates the demand for raw materials and materials. This quantity may be varied by changing conditions of production.
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The companies separately account for the direct material expenses, including costs of materials and raw materials (they become part of the product, so their value directly refers to certain finished products). The magnitude of these costs are always calculated by multiplying the physical indicators used for production. In some cases these figures are too high. Such materials relate to the subsidiary. These costs are allocated to the company for indirect costs, which include overhead costs. Each company on the basis of their specificity decides which materials are key to the subsidiary.
Material costs are controlled by four main methods: document (issued as separate documents), the party of cutting (distribution of materials on account the map – cutting the sheet), batch control and accounting (batching of materials and raw materials at a uniform technological parameters), inventory (stock inventory and raw materials).
In some industries the distribution of materials and raw material types of products is carried out straight through. In some industries, they relate to groups of products, and therefore they are classified with the help of the indirect regulatory or coefficient method. Material costs are estimated, respectively, the specific conditions of economic activity.
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