What is the system of production stages?

Productivity stage system is the suitable system in case the product that passes through the stages of production or different stages or sections, such as factories that produce notebooks

At the beginning, paper is cut in different sizes, and then it enters a second stage, where the paper is divided into different sizes according to the number of paper in the notebooks, and then it is entered into a second production line in order to be wrapped and be a complete product such as iron and steel production factories

Here it is required as a cost accountant is to determine the cost of the product in each stage and transfer it to the next stage at this cost and record this in my production reports, and thus we can distinguish the production stages system from other cost systems, especially the production orders system In that the system of production stages is more typical

The logical sequence of the system of production stages

Daily entries

First we buy our raw materials from our supplies and prepare ourselves for work, and like any purchase we install it in this way:

From raw material account / stock.1, 000,000

                                               To the account / suppliers or cash 1,000,000

So that I got my raw materials and the workers are ready to work and the equipment are in their places, everything is perfect

The production management sends to warehouse keepers an item called a disbursement authorizations. Which they can spend certain quantities of these raw materials for the production stages or for divisions

And when the exchange is actually done, we prove what was spent with this entry

10,000 EGP from account / production under operation, the first stage

10,000 to account / stock of raw materials

Thus, we have known the cost of this stage, whether from raw materials or direct materials (which is the first component of costs)

How to convert the product from raw material to complete material

We must know the cost of this stage of the conversion costs and they call it formation costs because it is the costs that contribute to the conversion of the product from raw material to a complete product Because the raw material itself will not make a product where there must be workers working and with this labor there will be other costs of expenses such as rent, electricity, loss, taxes, etc.

How to calculate wages for workers

The wages of the department workers or this stage, it is easy to determine their cost by knowing each product it took how much time in this phase how much and the hourly wage rate and this is done through a statement and thus the cost accountant records the number of hours for each worker. If the worker Ahmed worked 10 hours * 20 pounds per hour cost the producer is 200 pounds, the employee's wages, Ahmed, and so on for the rest of the workers.

After I see how much this stage costs from (direct and indirect) wages, and I also see the allocation  of this stage of indirect costs (and we will talk a lot about this point) by making this entry

20,000of account / production in progress - first stage

To those mentioned

10,000 Account / direct and indirect wages

5,000 Accounts / rental expense

5,000 Accounts / insurance expense

Thus, we will know how much the cost of this stage has been until now

10,000 Raw materials + 20,000 transfer costs

So if I produce 10,000 notebooks, one notebook will cost me 2 pounds until now

After that, we transfer the product to the second stage to be completed

20,000 Account / second stage

20,000 To the account / first stage

How to follow cost centers and calculate wages

From here, I will be able to track the cost centers of my merchandise and know that it has arrived at Levin, and this will be in the form of a report saying that the money got out of the safe, the store went in the form of raw materials and got out of the store and went to the product in the form of in-progress production

.The money got out from the treasury and went directly into operating production in the form of wage calculations and other expenses

.. And everything that emerged from this stage went to a second stage

This is what distinguishes the cost accountant from the financial accountant, who aims in the end to make financial statements in accordance with the standards.

The cost accountant determines the product's cost, and the suggested selling price, in order to cover its cost

He says it is this product that contributes to covering the costs in the company by the amount of its performance and continues to produce it, or not

This is in contrast to the analytical reports that he provides to analyze the cost of the product at every stage in the production stages system

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