CALCULATION OF THE ACTUAL COST IN THE CHEMICAL FERTILIZER INDUSTRY

Transcription

1 CALCULATION OF THE ACTUAL COST IN THE CHEMICAL FERTILIZER INDUSTRY Prof. Io Ioescu Ph. D Uiversity of Craiova Faculty of Ecoomics ad Busiess Admiistratio Craiova, Romaia Abstract: The mai goal of the research is to preset a way of orgaisig the maagerial accoutig of totally ad semi fiished product obtaied i chemical fertilizer idustry etities. For this study, we aalyzed the curret priciple of maagerial accoutig to a etity i the studied area, i order to emphasize the eed of orgaizig ad implemetig a moder accoutig maagemet to cotrol the cost ad icrease the performace of the etities i this area, startig from the premise that there are sufficiet similarities betwee etities i the field. The research has highlighted the fact that, owadays, the cost calculatio is orgaized usig traditioal methods, which focus o the mothly determiatio of the actual uit cost per product (semi-fabric) ad that it is ecessary to orgaize ad implemet a maagerial accoutig, based o the use of a moder method, amely the stadard cost method combied with cost cetre method. The major implicatios of the proposed system for the researched field are the mothly calculatio of actual costs per cost cetres, the calculatio of the actual cost per product, as the fial cost carrier, to be performed over loger periods of time, usually, quarterly. JEL classificatio: M41, M49 Key words: actual cost, cost cetre calculatio, product calculatio, cost cetres productive, cost related cetres 1. INTRODUCTION Relevat ad performig decisio makig is iflueced predomiatly by the quality of iformatio provided to the maagers, ad timeliess with which they are trasmitted. Traditioal methods of calculatio curretly used by etities i the chemical fertilizer idustry, those beig the comprehesive method ad the phased method, preset a series of drawbacks, icludig historical character, lack of efficiecy ad foresight. Give that etities i the chemical fertilizer idustry operate today i a competitive market where prices are determied by the ratio of supply ad demad, ad masterig costs is oe of the factors that ca esure the achievemet of targeted performace, that this will require the itroductio of a system of maagig through costs, which aims to provide operatioal ad relevat ecoomic iformatio to the maagemet process at the level of the aalyzed etities. 2. OBJECTIVES 39

2 A moder maagemet of ecoomic activity opposes, amog other thigs, the accuracy of the late determied idicators, their operability eve at the risk of approximatios, as well as a permaet cotrol of the cost of productio o cost ceters as ceters of resposibility by measurig the results of the activity carried out at those ceters. These requiremets, as well as ratioalizig the calculatio by givig up the mothly cost-per-product cost calculatio i favour of cost ceter calculatios at the level of direct expediture supports its more proouced orietatio i relatio to the particularities of the techology ad orgaizatio of the etity's productio. Compared to other sectors of activity, we believe that i the chemical fertilizer idustry, which has a mass productio, the cost ceter calculatio wis. This is ot to be uderstood i absolute terms, as it is ecessary to have a umber of prerequisites for orgaizig the cost ceter calculatio. The two calculatios - o cost ad product ceters - should ot be opposed to each other, both of which are ecessary to determie the cost of fial cost carriers, ad the latter is deducted from the former. What distiguishes them is the amout of time each of them takes, ad the scope, the cost ceters calculatio for all productio ad ot just the productio of goods, as is the case with the product calculatio. 3. METHODOLOGY To carry out this study, we aalyzed the curret coceptio cocerig the orgaizatio of maagerial accoutig for the etities from the idustry of chemical fertilizers. The mai methods of research used for performig the scietific demarche were of aalyze ad sythesis ad also of qualitative research. The iformatio about this subject were get by studyig the specialized literature i our coutry ad aboard, by aalyzig the legislatio i force afferet to this domai. 4. CALCULATION OF ACTUAL COSTS BY COST CENTRES A moder maagemet of ecoomic activity opposes, amog other thigs, the accuracy of the late determied idicators, their operability eve at the risk of approximatios, as well as a permaet cotrol of the cost of productio o cost ceters as ceters of resposibility by measurig the results of the activity carried out at those ceters. These requiremets, as well as the ratioalizatio of productio expediture ad cost calculatio, ca be achieved i chemical fertilizer idustry etities by calculatig mothly cost-effective costs per cost ceter, calculatig the actual cost per product as the fial cost carrier, are performed over loger periods of time, typically, quarterly. Ratioalizig the calculatio by givig up the mothly cost-per-product cost calculatio i favour of cost ceter calculatios at the level of direct expediture supports its more proouced orietatio i relatio to the particularities of the techology ad orgaizatio of the etity's productio. Compared to other sectors of activity, we believe that i the chemical fertilizer idustry, which has a mass productio, the cost ceter calculatio wis. This is ot to be uderstood i absolute terms, as it is ecessary to have a umber of prerequisites for orgaizig the cost ceter calculatio. 40

3 The two calculatios - o cost ad product ceters - should ot be opposed to each other, both of which are ecessary to determie the cost of fial cost carriers, ad the latter is deducted from the former. What distiguishes them is the amout of time each of them takes, ad the scope, the cost ceters calculatio for all productio ad ot just the productio of goods, as is the case with the product calculatio. For the mothly settlemet, appreciatio ad cotrol of the activity carried out o cost ceters, the total ad uit costs must be kow i each of the ceters. I this cotext, the total expediture shall be calculated by addig up the expediture collected o the calculatio items at the ceter cocered. For example, cost ceters oly accout for direct costs to the ceter, i.e. icludig maiteace ad operatio costs of the machie; at the related cost ceters that are set up at the level of the departmet are cosidered oly the geeral expeses of the departmet, developed o expeses articles, etc. Exceptios are made by the cost ceters set up i the auxiliary workshops with varied productio, where, for productio ceters, they are take ito accout as direct expeses, those icluded i the calculatio items used at the same ceters withi the mai sectios, except the maiteace ad operatio costs of the equipmet ; these are take ito accout at the related cost ceters at the level of the workshop, sice the geeral expeses of the sectio are take ito accout at the related ceters established at the level of the sectio. For the uit costs of the cost ceter, these are determied by reportig the total expediture to the productio quatity obtaied from that ceter, expressed i atural or equivalet uits, usig the followig calculatio relatio: Cu = Chi / Q (1) i=1 Where: Cu = uit cost of the cost ceter; Ch = total costs of the cost ceter; Q = the amout of productio obtaied at that cost ceter; i = calculatig items. Measurig the uit cost achievemets of the cost ceter ca also be doe by applyig a variat of the T.H.M. It implies the reportig of the total material expeses, the quatity of maufactured products, plus the processig costs per uit of product, calculated i relatio to the umber of hours of operatio of the plat. For the calculatio of uit processig costs, the total processig costs, the umber of hours of operatio of the istallatio ad the total expediture per hour of processig are reported. These are multiplied by the time cosumed per uit of product, calculated by reportig the total umber of hours of operatio to the resultig product quatity, ad so the uitary processig costs are kow. Although i both variats the fial result is the same, the applicatio of the first method has the advatage that it greatly simplifies the calculatios. There are also two variats which, although complicatig the calculatios, make it easier to obtai results whe a cost ceter obtais more products but ot i a simultaeous productio process, such as the ammoium itrate / ammoium itrate plat, e.g. This optio ca also be used for productio cost ceters o assortmets, such as liquid fertilizer ad fertilizer plats, if 41

4 productio is ot performed simultaeously. However, if at these cost ceters the achievemets ca ot be expressed uitarily by the time factor (plat operatig hours), ad the assortmets made differ oly by cocetratio, they ca be used for settlemet ad quatitative uits. Expediture of the Ceter may be settled i this case, depedig o the total quatity maufactured, coverted ito equivalet uits. The calculatio of expediture o ceters for settlemet purposes ca be doe methodologically, respectig a set of stages, traversed i a well-defied order of iheritace. Thus, the expeses of the ceters set up for auxiliary activities are calculated first ad oly the expeses of the ceters set up for the other basic activities, admiistratio ad maagemet ad sales are calculated. This order of successio is determied by the fact that the expeses icurred by the acillary activities are, from the poit of view of the calculatio, as expediture items either at the level of the cost ceters set up for the basic activity or at the level of the cost ceters set up for the other activities of the etity, depedig o the iteded use of the products, works ad services provided by acillary activities. I coectio with the calculatio of expediture o ceters set up for acillary activities, the followig steps must be take: - Establishig productio cosumed for its ow eeds ad settlig it; - Settlemet of reciprocal beefits betwee auxiliaries; - Calculatio of the uit cost of the cost ceters set up for the auxiliary departmets. With regard to the first two stages, the problem is solved by methods kow ad widely preseted i the literature 1, with the particularities required by the cost ceters calculatio. Regardig the calculatio of the uit cost of the cost ceters set up for the auxiliary departmets, the problem is solved differetly, depedig o whether it is a productive or related cost ceter, ad i the case of productio ceters, depedig o the character of the productio obtaied. Thus, i the case of homogeeous productio sectios, all costs are direct to the productio ceter, where the uit cost is determied by the geeral model of calculatio preseted above. I the case of departmets with heterogeeous productio, ot all costs are direct i relatio to the output produced, which leads to the distributio of those idirectly based o a uit of work characteristic of the activity (hours-workers or machie hours), resultig i the followig calculatio model of uit cost: dir id Chri i=1 1 Căli Oprea, Ma Mariaa, Nedelcu Moica Viorica - Maagerial Accoutig, Teachig ad Pedagogical Publishig House R.A., Bucharest, 2008, pp ; Iacob C., Ioescu I. & Goagără D. - Maagemet Accoutig i lie with Iteratioal Practice, Uiversitaria Publishig House, Craiova, 2007, pp

5 Chri + x Op i=1 Or Cu = (2) Q Where: Cu = the uit cost of the cost ceter; Chr = expeditures related to the created productive ceter; Or = total hours of workers or machie hours at the level of the productive ceter; Op = hours of workers or machie hours related to the product for which the uit cost is calculated; Q = the quatity of product produced for which the uit cost is determied; i = calculatig items; dir = direct expediture o the product; id = idirect costs to the product; I the case of related cost ceters, the assessmet of the activity is doe by calculatig the total actual costs resultig from the summatio of the calculatio items ad their compariso with the stadard oes. After the cost calculatio has bee calculated o the cost ceters set up for acillary activities, the actual costs are calculated o the cost ceters set up for the core busiess. For this purpose, it is first to settle the output delivered by the auxiliary departmets to the basic sectios, which is differet depedig o the character of the productio. Thus, i the case of acillary productio uits with homogeeous productio, for the settlemet of the cost of the works ad services delivered by them to the basic activity, it is ecessary first to allocate the expeses related to the related ceters at the level of the departmet to the productio ceters, usig the supplemetatio procedure. The share of expeditures (C) to be settled to the basic sectios is determied accordig to the relatioship: (3) Chfi i=1 Chrk + k=1 B Cj = x qj, Q Where: Chr = costs related to the productio ceter: Chf = costs related to the related site; k = productio cost ceter; j = the beeficiary base sectio; i = items of expediture; s = sectio; s 43

6 B = basis of distributio; Q = the total quatity of productio achieved; q = the amout of productio settled. I the case of the auxiliary workshops with heterogeeous productio, for the settlemet of the works ad services delivered to the basic sectios, it is ecessary first to allocate the costs related to the related workshop level ad the to the related sectios at the level of the sectio, to the productive ceters usig the procedure supplemet. The calculatio relatio for the share of expeditures to be settled o the beeficiary base sectio is prezeted i equatio (4). By applyig this methodology for the settlemet of expeses from acillary departmets, startig from the cost ceter calculatio, the cost of product costig stage is removed as a accoutig settlemet amout ad a performace idicator, which leads to the simplificatio ad ratioalizatio cost calculatio. c at s Chfg g=1 i=1 Chfi Chrk + + k=1 B at B s Cj = x qj c, (4) qk c k=1 Where c = the order; at = atelier; g = umber of related cost ceters. The rest of the otatios have the same meaig as above. After determiig the costs related to the productio provided by the auxiliary departmets of the cost ceters, the accoutig for the settlemet of the respective productio shall be carried out by debitig the accouts which reflect the cost ceters, amely: 921 "Basic Busiess Expeditures", 923 "Idirect Productio Expeses", 924 "Geeral Admiistratio Expeditures", as appropriate, ad creditig of accout 922 "Expediture o Acillary Activities", Aalytical Ceter of Costs Provider. This settlemet is made at the cost of productio, thus without the allocatio of the geeral admiistrative expeses share. I relatio to the calculatio of actual expediture o the cost ceters set up for the core busiess, the same calculatio priciples are used as for the cost ceters set up i the acillary activities. What is more, it is the issue of homogeizig the output produced from each cost ceter by meas of equivalet uits whe it is ot homogeeous. 44

7 5. CALCULATION OF ACTUAL COST PER PRODUCT Although oe of the major priciples of moder maagemet is to determie productio costs by cost ceters, however, periodically, the costig of the product has to be calculated as a costig stage startig from cost ceters. I chemical fertilizer etities, we believe that this should be doe quarterly, i the curret, ad aual, period of ecoomic stability. Uder moder ecoomy coditios, maagemet has to serve a ecoomic goal by calculatig the actual cost per product: cotrollig yields ad choosig the optimal optio i programmig, thus becomig a basic elemet for substatiatig decisios. Whe determiig the actual cost per product, the same methodological priciples used to develop the stadard product calculatio are followed 2. Thus, with regard to the core busiess, after performig all the idirect cost allocatio operatios, the flow of the aalysts' accout 921 "Base Expeditures", opeed o each plat at the ed of the quarter, collects all costs icurred i maufacturig productio. With regard to the particularities imposed o the calculatio techique by the umber of products obtaied from each istallatio, it should be oted that i the chemical fertilizer idustry, the followig phases of maufacture may result: - oe mai product ad oe or more by-products (recoverable ad reusable materials); - oly mai products, with o by-products; - oe sigle product differetiated o multiple varieties ad oe or more byproducts (recoverable ad reusable materials). The maufacture of these products, kow as simultaeous, coupled or associated products, is uitary ad is orgaically related to some of the total productio costs. I order to be able to separate from the total costs of each product ad calculate its cost it is ecessary to kow which of the products is the mai oe ad which is secodary oe; this is determied by the importace of the products i the etity. The uit cost calculatio is the made i relatio to the umber, character ad importace of the products usig the followig procedures: quatitative process, equivalece process, product equivalece process, value deductio process 3. This methodology is retaied i the proposed calculatio system, but based o cost ceter calculatios, with a distict follow-up of stadard expeditures ad deviatios from these costs. It is also complemeted by the methodology for the distributio of idirect costs preseted i the literature 4. 2 Ioescu I. - Stadard Product Calculatio i the Chemical Fertilizer Idustry, Aals of the Uiversity of Craiova, Ecoomic Scieces Series, o. 44, vol. 1, 2016, pp Căli Oprea, Ma Mariaa, Nedelcu Moica Viorica - Maagerial Accoutig, Teachig ad Pedagogical Publishig House R.A., Bucharest, 2008, pp ; Iacob C., Ioescu I. & Goagără D. - Maagemet Accoutig i lie with Iteratioal Practice, Uiversitaria Publishig House, Craiova, 2007, pp Ioescu I. - Stadard Product Calculatio i the Chemical Fertilizer Idustry, Aals of the Uiversity of Craiova, Ecoomic Scieces Series, o. 44, vol. 1, 2016, pp

8 I this cotext, we will further exemplify the calculatio of the total ad uitary cost i the case of a maufacturig process i which oly the mai products are produced, with o by-products. I the chemical fertilizer idustry, this situatio is met at the cost ceter "Ammoium itrate / calcium ammoium itrate plat" where the mai products are obtaied i successive stages: ammoium itrate, 34,5% N2, expressed 100% N2, ad ammoium itrate, 27% N 2 cocetratio, expressed as 100% N 2. The actual cost of the two products is determied from the cost ceters calculatio (Table o. 1), statig that for the sake of simplicity it is cosidered that the data i these calculatios relate to the activity carried out over a quarter. Firstly, calculatios are made for the distributio of costs o productio cost ceters o the two maufactured products as follows: - expediture recorded i the calculatio items: "direct auxiliary materials"; "semifiished products" ad "techological utilities" shall be idividualized for each of the two products, depedig o the quatity of actual productio actually produced, uit-specific cosumptio ad uit costs; - the followig allocatio coefficiets were take ito cosideratio whe determiig the trasport costs: stadard, 18%; actually, 20%; - for the other items of calculatio, the costs are idirect i relatio to the two products maufactured, for which reaso part of the products is distributed as follows, as follows. Table o. 1 The actual calculatio of the productio cost ceter o the first quarter of year N Code/Sectio ame: Ammoium itrate Code/Istallatio ame: Ammoium itrate/calcium ammoium itrate Calculatio article code Expeditures Stadard Expeses Deviatios Actual costs 200 Direct auxiliary materials 208 Polyethylee bags Flotigam Sulfuric acid Agero 100% s.a Diatomite Dolomite Total direct auxiliary materials Expeses for trasport - supply Semi-fiished products of ow products 501 Ammoia Nitric acid Total semi-fiished products of ow productio 600 Techological utilities 601 Electricity Recirculated water

9 604 Thermal eergy Codesed water Methae gas Total techological utilities Direct wages CAS (Health Isurace Fud), CASS ad Uemploymet Direct Payroll Fud 1000 Expediture o maiteace ad operatio of machiery Total istallatio The actual total direct salaries of lei are distributed accordig to the actual hours of operatio of the istallatio, which are as follows: - For the productio of ammoium itrate 482 hours - For calcium ammoium itrate maufacture 107 hours Total basis of assigmet 589 hours The extra pay factor is as follows: K = / 589 = lei/hour (5) Share of direct salary for each product: - Ammoium itrate 482 x = lei - Calcium ammoium itrate 107 x = 15,802,000 lei Expeditures o social security cotributios ad the uemploymet fud are determied by weightig the direct wages by 40%. The expeses for the maiteace ad operatio of the equipmet i the total amout of lei (actual expeses lei mius the deviatio of the capacity of lei), are distributed o the two products accordig to the umber of actual hours of operatio of the istallatio, as follows: The supplemetary factor will be: K = / 589 = lei/hour (6) The share of equipmet maiteace ad operatio costs for each product is: - Ammoium itrate 482 x = lei - Calcium ammoium itrate 107 x = lei The geeral expeses of the ammoium itrate sectio i the total amout of lei (actual expeses mius the capacity depletio) are allocated accordig to the umber of actual hours of operatio of the istallatios i the departmet, which is preseted as follows: - For ammoium itrate 482 hours - For calcium ammoium itrate 107 hours - For liquid fertilizer 536 hours Total basis of distributio hours The supplemetary factor will be: 47

10 K = / = lei/hour (7) The share of the geeral expeses of the sectio for each product is: - Ammoium itrate 482 x = lei - Calcium ammoium itrate 107 x = lei - Liquid fertilizers 536 x = lei The share of the geeral admiistrative expeses of each of the two products is determied by weightig the actual percetage of the distributio of these costs (0,80%) with the actual productio cost, as follows: - Ammoium itrate x 0,80% = lei - Calcium ammoium itrate x 0,80% = lei The packig costs i the total amout of lei were allocated to the products accordig to the covetioal quatity of packaged products, which is as follows: - Urea tos 100% N 2 - Ammoium itrate tos 100% N 2 - Calcium ammoium itrate tos 100% N 2 Total distributio base tos 100% N 2 The supplemetary factor will be: K = / = lei/to (8) The share of the cost of the packagig plat for each product is: - Ammoium itrate x = lei - Calcium ammoium itrate x = lei Oce the idirect costs have bee allocated to the two products produced at the ammoium itrate/calcium ammoium itrate plat by addig the share of these costs to the direct costs, the full total cost of each product is obtaied. Next, we determie the cost per uit of product maufactured by reportig the total cost to the quatity obtaied from each product, the calculatio beig made o each idividual calculatio item ad separately for the stadard expediture, deviatios ad expeses effective. The calculatio of the actual cost accordig to the methodology preseted for the two products maufactured at the ammoium itrate/calcium ammoium itrate plat is show i Tables o. 2 ad o CONCLUSIONS Although oe of the major priciples of moder maagemet is to determie productio costs by cost ceters, however, periodically, the costig of the product has to be calculated as a costig stage startig from cost ceters. I chemical fertilizer etities, we believe that this should be doe quarterly, i the curret, ad aual, period of ecoomic stability. Uder moder ecoomy coditios, maagemet has to serve a ecoomic goal by calculatig the actual cost per product: cotrollig yields ad choosig the optimal optio i programmig, thus becomig a basic elemet for substatiatig decisios. 48

11 By improvig the cost calculatio accordig to the methodology preseted, the maagemet's attetio focuses oly o the aspects that ivolve takig urget decisios ad esures the maagemet of the cost ceters uder the coditios of icreased resposibilities ad operatives. REFERENCES 1 1 Bouqui H. Maagemet Accoutig, Traslatio by Tabără Neculai, TipoMoldova Publishig House, Iași, Căli O., Ma M., Maagerial Accoutig, Teachig ad Pedagogical Publishig House R.A., Bucharest, Nedelcu M.V. 3. Iacob C., Ioescu I., Maagemet Accoutig i lie with Iteratioal Practice, Uiversitaria Publishig House, Craiova, Goagără D. 4 Ioescu I. Stadard Product Calculatio i the Chemical Fertilizer Idustry, Aals of the Uiversity of Craiova, Ecoomic Scieces Series, o. 44, vol. 1, 2016, pp *** Order OMFP o. 1826/2003 which approved the Metios o some measures related to the orgaizatio ad performace of maagemet accoutig, Official Gazette of Romaia o. 23/ *** OMFP Order 1802/2014 for the approval of the Accoutig Regulatios o the idividual aual fiacial statemets ad the cosolidated aual fiacial statemets, Official Joural o. 963/ Table o. 2 Calculatio of actual cost per product for Quarter I, Year N Code/Sectio ame: Ammoium itrate Code/Istallatio ame: Ammoium itrate/calcium ammoium itrate Code/Product ame: Ammoium itrate Effective physical quatity: toes Effective equivalet quatity: toes / year Calculati o article code Expeditures Total Expeditures (lei) Uit Expeditures (lei) Stadard Deviatios Actual Stadard Deviatios Actual 200 Direct auxiliary materials 208 Polyethylee bags Flotigam Sulfuric acid Agero 100% s.a Diatomite Dolomite Total direct auxiliary

12 materials 300 Expeses for trasport supply 500 Semi-fiished products of ow products 501 Ammoia Nitric acid Total semi-fiished products of ow productio 600 Techological utilities 601 Electricity Recirculated water Thermal eergy Codesed water Total techological utilities Direct wages CAS (Health Isurace Fud), CASS ad Uemploymet Direct Payroll Fud 1000 Expediture o maiteace ad operatio of machiery 1100 Geeral expeses of the sectio Stadard productio cost Geeral admiistrative expeses 1300 Packagig costs Stadard full cost Table o. 3 Calculatio of actual cost per product for Quarter I, Year N Code/Sectio ame: Ammoium itrate Code/Istallatio ame: Ammoium itrate/calcium ammoium itrate Code/Product ame: Calcium ammoium itrate Effective physical quatity: toes Effective equivalet quatity: toes / year Calculatio article code Expeditures Total Expeditures (lei) Uit Expeditures (lei) Stadard Deviatios Actual Stadard Deviatios Actual 200 Direct auxiliary materials 208 Polyethylee bags Flotigam Sulfuric acid Agero 100% s.a

13 212 Diatomite Dolomite Total direct auxiliary materials 300 Expeses for trasport supply 500 Semi-fiished products of ow products 501 Ammoia Nitric acid Total semi-fiished products of ow productio Techological utilities 601 Electricity Recirculated water Thermal eergy Codesed water Total techological utilities Direct wages CAS (Health Isurace Fud), CASS ad Uemploymet Direct Payroll Fud 1000 Expediture o maiteace ad operatio of machiery 1100 Geeral expeses of the sectio Stadard productio cost Geeral admiistrative expeses Packagig costs Stadard full cost