SEMINARIO 4 : "CONTABILIDAD DE COSTOS CASO PRÁCTICO"

Main ideas and lessons

• Purpose of cost accounting in manufacturing

  • Manufacturing/production costs are the costs incurred during the transformation process that converts raw materials and other resources into finished goods.

  • Costs are essential because companies aim for profitability, typically expressed as: Profitability = Sales − Costs − Expenses

  • Cost accounting supports cost control to improve profitability by:

    • reducing costs and expenses,
    • maintaining/increasing sales,
    • improving efficiency in sales management, process management, and cost management.

• What “cost” means

  • A cost is presented as an economic sacrifice/effort required to achieve an objective (producing a good or providing a service).
  • Costs are tied to adding value to inputs (e.g., materials → labor → indirect manufacturing costs).

• Why costs are calculated

  • To determine an appropriate pricing strategy:
    • Cost price = what it costs to produce.
    • Selling price = cost price + profit margin required by management and/or allowed by the market.
  • To evaluate competitiveness using comparisons like:
    • Target cost vs. actual cost (if actual is lower than target, the firm is competitive).
  • To compute sales margin, where margin depends on market price (not an arbitrary percentage).

• Cost accounting vs. financial accounting

  • Financial accounting: external reporting (investors, banks, governments, tax authority), mainly based on IFRS/IAS; focused on the company as a whole.
  • Cost accounting: internal reporting for planning/control/decision-making; focuses on detail by products, product lines, and cost centers.

• Core planning/control logic

  • Use estimated (budgeted/forecast) costs before production.
  • Track actual costs and compare them to estimates for control and to improve decisions.

• Definitions of key cost concepts

  • Cost elements commonly used in the practical case:
    • Direct raw materials
    • Direct labor
    • Manufacturing overhead (indirect manufacturing costs)
  • Important formulas introduced:
    • Manufacturing cost = Raw materials + Direct labor + Manufacturing overhead
    • Prime cost = Raw materials + Direct labor
    • Production cost (described as including overhead) = Prime cost + Manufacturing overhead
  • Conversion costs: labor + manufacturing overhead (emphasized as the parts that “convert” inputs rather than being the raw materials themselves).
  • Break-even point: the point where sales and costs intersect.

• Cost classification (various angles)

  • By traceability:
    • Direct costs (direct materials, direct labor)
    • Indirect costs (indirect materials/labor and other indirect expenses)
  • By behavior vs. production volume:
    • Variable costs: change proportionally with output
    • Fixed costs: constant within a relevant range (e.g., rent)
    • Semi-variable costs: fixed + variable components
  • Opportunity cost: the cost of choosing one alternative over another (the foregone best option).
  • By production nature:
    • Job order costs (discontinuous/ordered production)
    • Process costs (continuous production, accumulated over processes)

• Production process structure

  • Input stage → Transformation stage → Output stage
  • Example of production types:
    • primary (raw materials extraction/packaging),
    • secondary (manufacturing/transformation),
    • tertiary (service sector).

• Cost sheets and registers

  • A cost sheet (or production order documentation) summarizes:
    • costs by element (direct materials, labor, overhead),
    • quantities, total cost, and unit cost,
    • start/end dates and production order details.
  • A cost register is a formal record where costs incurred are stored for reporting to management and (in the discussion) declared according to tax rules (referencing Income Tax Law Regulations and SUNAT-related entries).

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Methodology / step-by-step instructions (practical case logic)

A) General steps to determine product costs

1. Define the costing period
2. Accumulate costs and expenses for that period
3. Define the cost object / costing method
4. Calculate each cost element
   • direct raw materials
   • labor
   • manufacturing overhead
5. Prepare a cost summary (cost sheet / production order support)

B) Practical case: accounting for raw materials (shirts)

Scenario

• Textile company producing 100 shirts in one day
• Purchases include fabric, thread cones, buttons, labels, bags, boxes.
• Consumption is smaller than purchases because of inventory/stock and purchase quantities.

Logic performed

For each purchased raw material/supply:

• Record purchase (with typical purchase entry and VAT logic as described)
• Record entry into warehouse (inventory)
• Record consumption for the production quantity used
• Transfer consumed costs into the production cost center

Direct vs. indirect materials

• Direct raw materials: fabric, thread, buttons (trace directly into the shirt product)
• Indirect raw materials / supplies: labels, bags, boxes (packaging/branding materials)
• The case emphasizes:
  • direct materials follow one inventory/account treatment,
  • indirect packaging/supplies follow another (containers/packaging treatment was used).

Illustrated computation results (as stated)

• Direct raw material consumed for 100 shirts: 8,175
• Indirect raw material/supplies consumed for packaging/branding: 110
• Total raw materials used: 8,285

C) Practical case: accounting for labor

Logic

• Identify labor roles used for production (example roles listed: cutter, finisher, button setter, packer).
• Compute labor cost for production time (production completed in one day, so allocate monthly payroll proportionally by working days/time).
• Include labor-related burdens described (social security, AFP assumptions, vacation/bonuses, health coverage, CTS, etc., with specific account flows).
• Then:
  • transfer the total labor cost from payroll accounts to the production cost center via the described “destination” entry approach.

D) Practical case: accounting for manufacturing overhead

Logic

• Manufacturing overhead includes outlays other than direct materials and direct labor:
  • rent, depreciation, energy/water, etc.
• Allocate overhead by relevant time/use:
  • the case divides monthly overhead across production days (e.g., 30-day month and “one day” production).
• Then transfer overhead into production cost centers using the described overhead allocation/account flows.

E) Cost sheet to derive unit cost and selling price

Compute

• Production cost = (raw materials + labor + manufacturing overhead)
• Unit cost:
  • unit cost = total production cost / 100 shirts
• Add additional items affecting final cost:
  • selling/marketing expenses treated as a percentage markup (example: 10% applied)
• Add profit margin:
  • margin and selling price depend on market acceptance (market-limited, not purely cost-driven)
• Then compute for the batch:
  • expected selling revenue
  • cost of sales
  • gross profit for the batch

Results stated in the case

• Unit production cost for shirts: about 86.03 (as stated)
• After adding marketing/expense factor, the final costs and selling logic were described
• Profit estimation was illustrated for the 100-shirt batch

F) Handling work in process (if not finished)

• If production is not complete:
  • transfer costs to Work in Process – Unfinished Goods
• When finished:
  • move from WIP back to production/finished goods accounts (workflow conceptually described in the lecture).

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Speaker / sources featured

Speaker

• Mangal Bagh Chávez
  • Certified public accountant; university background and professional experience described in the introduction.

Institutional/source references mentioned

• Sabio Antúnez de Mayolo Higher Technological Institute (seminar hosting)
• SUNAT (tax reporting context referenced)
• IFRS / IAS, specifically IAS 2 (materials treatment noted)
• Income Tax Law Regulations (cost register/accounting declaration referenced)
• International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) (accounting framework context)

Other participants (spoken to / asked questions via chat)

Named/identified attendees appear in subtitles through questions or acknowledgments, including:

• Juan Carlos
• Mr. Lázaro / Iván Lázaro (asked about break-even point)
• Mr. Nolberto
• Mr. Carlos
• Miss Maribel
• Miss Marta
• Mr. Faustino Racing (mentioned during accounting discussion)
• Mr. David
• Miss Wear (responds about overhead definition)
• Miss Wang Manson (responds about indirect raw materials/supplies)
• Additional unnamed participants who speak during the session.