Page 237 - F1 - AB Integrated Workbook STUDENT 2018-19

The relationship between accounting and other business functions

Production

The production department plans and overseas the production of goods. It co-
ordinates with the accounting department as follows:

The production department measures
Cost, measurement, quantities of materials and time used; the
allocation and management accountant gives a monetary
absorption value to the item. Costs are then allocated and
absorbed to calculate production costs based
on advice given by the production department.

The production department will decide how
many items of what type are to be produced.
Budgeting The cost of producing these will be determined
by the accounting and production departments
together, and incorporated into the overall
budget.

The production and accounting departments
will discuss the features that can be included in
Cost v quality products and the raw materials that should be
used. They should agree which better quality
materials and features justify the extra cost,
and discuss how to maximise quality and profit.

The production department will liaise with the
inventory section to ensure that there are
Inventory
significant raw materials in inventory for the
production that is planned.

231