THE EFFECT OF THE USE OF INVENTORY METHODS AND PRODUCTION PROCESSES ON THE COST OF PRODUCTION UD AZZAHRA JAYA (Slap Rope Making Company)

Abstract

The method of inventory of goods is one of the elements in determining the  cost of production. In addition to the inventory method, the production process can also affect the cost of production. In this study, the aim is to find out whether the use of inventory methods and production processes affects the cost of production at UD Azzahra Jaya. According to the results of the research, the use of the inventory method at UD Azzahra Jaya applies fifo. Because the purchase of raw materials is carried out when an order has been received from the customer, then the production process is carried out after the raw materials are sufficient. On process 1 in the June 2024 period with the use of 4,663 kg of raw materials, the use of raw materials used is raw materials that come on June 3 to 5, 2024, namely real incoming goods of 323 kg, 2,450 kg and 1,890 kg. In reality, the use of raw materials is not real, just because in the production process, the company does not re-weigh the raw materials to be processed. In process 1, after re-weighing, a different number was obtained from the number used by the company. The quantity issued was 322.9 kg, 2,450 kg and 1,889.7 kg with a total of 4,662.6 kg. These differences are called variences. This affects the cost of raw materials incurred for determining the cost of production.