Difference between traditional prime price and functional calculations. Nascent errors at wrong cost of products accounting
The release of products or provision of services imply the corresponding resource provision the size of which has big influence on the level of economy development of enterprises. Therefore every enterprise or productive link must know exactly how expensive the production of goods (works, services) is. This factor is especially important in the conditions of market relations, because the level of production inputs influences the competitiveness of enterprise, its inner economy. Economic and production activities in any enterprise are associated with the consumption of raw materials, fuel, energy, payment of wages, payments to social pension insurance of employees, accrued depreciation, and a number of other necessary expenses. By means of appeal these expenses are constantly compensated from the profit yield of enterprise from realization of products (works, services), that provides continuity of productive process. For calculating the total sum of all charges of enterprise they over are brought to the single index. Prime cost serves the function of such index. ABC costing is a calculation system, examining operations as basic objects of account of expenses and calculation for the cost accounting of products and determination of business processes efficiency. The method of stage-by-stage distribution on an unit of indirect charges cost is used. The essence of the method is the following: instead of overhead allocation on productive subdivisions the expenses are correlated with the certain types of activity (by functions), that are carried out on the behalf of the production of realization of one or another type of products.