Product Costing

What it does

Built around how the work actually happens

Material cost from actual issues, not standard assumptions
Conversion cost per kilo from wages, utilities and factory expenses
Cost per piece against the sale rate, order by order
Contribution by article and by buyer
Variance between planned and actual consumption

The daily routine this module replaces

Before the module, the cost clerk starts the day with a stack of hand-written issue slips from the grey-store, dye-house and weaving sheds. Each slip must be tallied against the physical stock book, then re-keyed into a spreadsheet that already holds last month’s figures. The dye-house foreman phones in the batch numbers that finished overnight; the clerk copies the chemical quantities from the batch cards into the same sheet, guessing which drums were used if the card is smudged. Wages are pulled from the payroll print-out and allocated by department, but the piece-rate weavers’ earnings are split across three different articles, so the clerk estimates percentages based on last week’s mix. Utility bills arrive late and are posted as a single line in the general ledger; the clerk divides the total by the month’s production tonnage to get a “standard” per-kilo rate that everyone knows is wrong but no one can prove. At month-end the spreadsheet is frozen, printed, and handed to the accountant who spends two days reconciling it with the trial balance.

How a document moves through the module

Every document is raised by the person who knows the facts, posted once, and then affects both stock and ledger without further handling.

Yarn issue note

The grey-store keeper scans the barcode on the cone and the job card; the system records the exact count, denier and supplier batch.
Posting reduces grey yarn stock and increases work-in-progress for the weaving shed.
The ledger is updated: debit weaving WIP, credit grey yarn stock.

Dye batch card

The dye-house supervisor enters the recipe quantities on a tablet mounted above the weighing station. The system checks the stock of each chemical and reserves it.
When the batch is posted, the reserved chemicals are consumed, dye-house WIP is increased, and the ledger posts: debit dye-house WIP, credit chemical stock.
The same card travels with the batch to the stenter; the operator records the actual steam, gas and power meters, so utilities are posted at the same time.

Weaving job card

The shed supervisor closes the card when the last piece is doffed. The system reads the actual picks, reed, and length from the loom’s PLC and calculates the exact yarn consumed, overriding any earlier estimates.
Posting moves the cost from weaving WIP to finished-goods stock and updates the ledger: debit finished goods, credit weaving WIP.
If the card shows piece-rate wages, the system splits the total across the articles on the card using the actual metres produced, not a standard ratio.

Utility meter readings

The maintenance team records daily steam, gas, electricity and water meters on a mobile form. The system calculates consumption per department and posts the cost to the appropriate WIP or overhead account.
No manual allocation is needed; the ledger reflects the actual usage the same day.

The reports it produces and the decision each one supports

Report	Content	Decision it supports
Production Costing report	Cost per piece and per kilo for every article, broken down by yarn, chemicals, wages, utilities and overheads. Figures are shown for the current month and year-to-date.	Sales team can quote confidently without eroding margin; production manager can see which articles are losing money and adjust the mix.
Dye Batch Register	List of every batch run in the period, showing actual chemical and utility consumption against the recipe, with variance in kilos and cost.	Dye-house manager can spot recurring variances and adjust recipes or operator training before the next run.
Conversion cost per kg	Total wages, utilities and factory expenses divided by the kilos produced, split by weaving, dyeing and finishing departments.	Factory accountant can compare departments and identify which one is dragging the average up; maintenance team can target energy-saving measures.
Contribution by article	Revenue minus direct material and conversion cost for each article, sorted by contribution margin. Buyer and order number are shown alongside.	Management can drop unprofitable articles or negotiate better rates with buyers who consistently order low-margin lines.
Variance report	Actual consumption of yarn, chemicals and utilities against the planned standard, expressed in kilos and cost.	Production planner can tighten standards or investigate process leaks; purchasing can challenge supplier quality if yarn variance is high.

What usually goes wrong when a plant runs without it

Without the module, the cost sheet is always out of date and never matches the ledger. The clerk’s spreadsheet uses last month’s utility rates, so the current month’s costs are wrong from the first day. When the accountant finds a discrepancy, the clerk has to re-key the entire month, delaying the management accounts by a week. Meanwhile, the sales team quotes from last quarter’s figures and discovers after shipment that the article is losing money. The dye-house runs the same recipe for six months before anyone notices that the chemical variance has crept up to 12 %; by then the plant has lost enough margin to cover a month’s wages. The production manager blames the dye-house, the dye-house blames the yarn, and the accountant spends every month-end reconciling two sets of numbers that should have been the same all along.

Stock records drift because issue slips are lost or mis-posted. The grey-store shows 500 cones in stock, but the physical count finds 300; the difference is written off as “shrinkage” and buried in overheads. The same happens with chemicals: drums go missing, or the same drum is issued twice because the card was smudged. When the year-end audit arrives, the stock adjustment wipes out the profit, and the owners have no idea which department is responsible.

Wages are allocated by guesswork. The piece-rate weavers’ earnings are split across articles using a fixed percentage, so a low-margin article that takes more time than expected still shows a profit on paper. The weaving shed looks efficient, but the plant is losing money on every metre. No one can see it because the cost sheet is built on estimates, not facts.

Questions about Product Costing

Can the module handle piece-rate wages that change every week?

Yes. The system reads the actual piece-rate card from the weaving shed and splits the total wages across the articles on the card using the metres produced, not a fixed percentage. If the rate changes, the new rate is applied to the next card without manual adjustment.

We run a shared dye-house for two plants. Can we split the utility cost between them?

Yes. Meter readings can be tagged by plant, and the system allocates the cost proportionally. Each plant sees only its own share in the cost sheet and ledger.

Our buyers ask for cost breakdowns with every shipment. Can the module produce them?

The Production Costing report can be filtered by order number and exported as a PDF. It shows the cost per piece and per kilo, broken down by material, wages, utilities and overheads, so you can attach it to the invoice.

We use a third-party payroll system. Can we still get accurate wage costs?

Yes. The module accepts a CSV export from the payroll system and posts the wages to the correct WIP accounts. Piece-rate wages are still split by actual production, so the cost sheet remains accurate.