Production is something many may want to get into, however when it comes to accounting, there are often times things that are overlooked. It’s not just that they are overlooked, but sometimes bluntly ignored. I want to make it clear why it’s important that your properly account for the cost of the items you produce – it directly impacts what you’ll be getting from the sale of the items. How are you about to determine sales prices for your items if you don’t exactly know the cost you must cover? 

When starting to produce it’s important to define materials you will need, activities and routines necessary process and sub-process by sub-process. It’s important to understand what and how is done.

Furthermore, once we have defined the process itself, we have to measure materials used during the process and not just measure, but also by increasing efficiency understand the normal usage of materials. In addition to materials one must calculate time spent on certain activities (detail is subject to your own need and decisions) to calculate time spent and measure the labor expenses per item produced. Again, the key word is efficiency within the process.

And ofcourse then there’s the question of general expenses and how they are measured for items produced. It’s about you to decide how they are allocated, but keep in mind that there needs to be a routine, consistency and comparability of how this is done.