Financial Education - Theory of the classification of production and business performance data

In order to carry out a detailed classification of all production data and business performance, it is essential to have a costing system that allows to know with precision the management of money and other resources and thus to determine with certainty the selling price. We can emphasize that there are other cost systems which allow to classify, accumulate and assign in a quantitative way the manufacturing elements of the products.

Among these systems we have the process costing and specific order costing, which can be performed in an entity according to the primary particularities of manufacturing. Therefore we can say that the costing methods allow companies to know the profitability and efficiency of their manufacturing under any perspective, for example by particular processing or batch, therefore the system must allow the implementation of a control in the entity.

The cost system by manufacturing orders is also known as: costs by specific production orders, work lot, customer orders. It is characterized because each of the costs incurred within the production process can be directly identified with the product and therefore is assigned to the order that the people who generates it, it is very useful in those companies in which the production process is based on batches or has a production system in which the product is made according to customer requests and specifications, as is the case of lithographic companies.

However, there are small and medium-sized companies that have an inadequate cost system according to the characteristics of the production process, since these entities offer their products to the client's taste, without having supply control with suppliers, losing more advantageous opportunities.

Likewise, they do not have the technical capacity of large companies, nor specialized personnel in any of the areas, i.e. their technology is limited, their administrative costs are very high, their financial capacity is minimal compared to large entities and the professional personnel in the cost area is scarce or nonexistent.