Materials that are used in a production process but do not form part of the direct cost of sales, such as lubricants and sanding discs.
Continuous production is a manufacturing process where raw materials are constantly fed into the production system to create a standardized product.
A phenomenon in economics where adding additional units of resources to a production process results in smaller increments of output due to overcrowding, inefficiency, or less effective resource allocation.
Direct Materials Inventory represents raw materials in storage that await transfer to production, subsequently forming part of the work in progress.
Understanding the elements of cost is fundamental for businesses to ensure efficient production and optimal pricing strategies. The three primary cost elements in a production process include material, labor, and expenses.
A detailed overview of equivalent units, explaining how unfinished units of production at the end of a period are measured and valued.
Indirect production refers to the creation of goods or services that are not directly consumed but are essential for the production of final products or services.
Intermediate goods are materials or components that are transformed by production processes into another form, often used to create final goods. For example, steel is an intermediate good that can be transformed into automobiles or ships.
A job card, also known as a job ticket, is a document that contains written instructions detailing the operations needed to complete a specific job. These instructions can take various formats, including physical cards or digital printouts.
Joint costs are costs that are incurred up to the point where multiple products are separately identifiable in a production process. They are essential in evaluating the cost-effectiveness and profitability of production processes.
The output of a process in which there is more than one product and all the products have similar or equal economic importance.
An approach to manufacturing designed to match production to demand by only supplying goods to order. This has the effect of reducing stocks of raw material and finished goods, encouraging those production activities that add value to the output, and minimizing levels of scrap and defective units.
The primary product that results from a manufacturing or production process, holding the greatest economic significance compared to any by-products or joint products.
Manufacturing inventory refers to the parts or materials on hand, needed for the manufacturing process. Adjusting manufacturing inventory to current production needs is a critical management responsibility.
A Manufacturing Requisition acts as an internal document within a manufacturing unit, outlining the specific raw materials, parts, and other resources required to produce a particular product, and facilitates inventory management.
The analysis of economic behavior at the level of individual market participants, mainly individual firms or consumers.
Quality Engineering is a portion of quality management concerned with prevention planning and the correction of nonconformance in the production or service cycle.
Raw material refers to the primary substances used as a component in the manufacturing process of finished goods. For instance, wool serves as the raw material in the production of woolen sweaters.
Raw materials are the basic materials that are used at the very beginning of a production process, essential for manufacturing final products.
Routing refers to the production method used to determine the sequence of manufacturing steps necessary to complete a product. The routing process is influenced by the type of product and its associated production process.
The net residual value of an asset at the end of its useful life, when it is no longer suitable for its original use. Fixed assets, inventory, or waste arising from a production process can all have a salvage value.
The split-off point refers to the stage in the production process where jointly produced products become separately identifiable and can be sold or further processed.
Spoilage refers to materials or goods that are rendered unusable or unsellable due to defects, damage, or expiration during the production process.
Statistical Process Control (SPC) is a method used to monitor, control, and improve the quality of production processes through the use of statistical charts. The primary goal is to ensure that products are produced correctly the first time, maintaining high-quality assurance standards.
Straight-line production is a traditional production-line method where all parts of the process are arranged sequentially on a straight production line, facilitating the efficient, step-by-step assembly of each piece.
A synthetic system refers to a production process that combines two or more materials or parts to complete a finished product.
Value-Added Tax (VAT) is a consumption tax imposed at each step of the production process, calculated as the difference between the purchase cost of an asset to the taxpayer and its resale price. It is a key source of tax revenue in many European countries.
Waste (also referred to as spoilage) is the amount of material lost as part of a production process. Acceptable levels of waste, known as normal loss, are part of the cost of production and are allowed for in the product costs. Any process or activity that does not add value is also considered waste.
Work in Progress (WIP) refers to the goods that are partially completed in a manufacturing process and are still undergoing the necessary transformation to become full-fledged finished products. It is a vital part of inventory management and accounting in production-focused industries.
