Components of the accounting production system

The system consists of six main components that work together to cover every aspect of the production process. Component Brief description Direct and indirect costs Include raw materials and direct labor (direct), and rent and machine depreciation (indirect) Production monitoring Track production stages from material purchasing to the finished product and record cost data Inventory management Track raw materials and finished goods and determine inventory value at the end of the period Pricing and cost allocation Distribute direct and indirect costs to products according to appropriate costing methods Profitability calculation Compare sales revenue with production costs to arrive at net profit Planning and budgeting Prepare budgets and monitor actual performance against planned performance