Methodology for planning and calculating the cost of agricultural produce

In its production and economic activities, the enterprise calculates and utilizes planned and actual (reporting) cost.

The planned cost of products is determined on the basis of technological charts for crops and livestock species, taking into account the necessary list of works, consumption rates for material resources, and standards for labor and financial expenditures, while focusing on the rational use of land and fixed assets, as well as the application of progressive agrotechnical and organizational measures. The calculation is based on the planned output of products.

The actual (reporting) cost is determined when summarizing the annual results of the enterprise’s economic activity, which is presented in the annual report. Comparing the reporting cost by cost categories with the planned one allows for identifying cost overruns or savings in funds and labor, and for discovering real reserves for reducing costs in the subsequent production cycle. The objects of cost calculation are the types of products (works, services). For each sub-sector of crop production and livestock farming, a specific object (or several objects) is identified, for which it is standard to calculate the cost.

T a b l e 13.2. Objects of agricultural product cost calculation

Sector Sub-sector Object Crop Grain crops Grain, grain waste, straw production

Vegetable crops Root vegetables, heads, bulbs, fruits,

Forage crops Green mass, root vegetables, tubers,

Perennial fruit and berry crops Fruits, berries, cuttings, runners Livestock Livestock farming Milk, offspring, live weight gain farming

Pig farming Offspring, live weight gain

Sheep farming Offspring, live weight gain, wool

In agriculture, the cost per unit of work performed by tractors (standard reference hectare) and draft animals (horse-day) is also determined. In crop production, the cost of cultivating 1 ha of a specific crop is determined; in livestock farming — the cost of raising 1 livestock animal or 1 centner of poultry.

Due to the necessity of cost allocation, the following sequence for calculating the cost of agricultural products has been adopted: 1) allocation of expenses for the maintenance of fixed assets to planning and accounting objects based on their purpose; 2) calculation of the cost of products (works, services) of auxiliary and subsidiary industrial production facilities providing services to the primary production; 3) allocation of costs for irrigation and land drainage, writing off beekeeping services for crop pollination; 4) allocation of brigade (farm), sector (shop) and general overhead expenses, and loan payments; 5) determination of the total amount of production costs by planning and accounting objects; 6) calculation of the cost of crop production; 7) allocation of expenses for the maintenance of feed preparation facilities; 8) calculation of the cost of livestock production; 9) calculation of the cost of livestock live mass; 10) calculation of the cost of products from subsidiary (industrial) production facilities related to the processing of agricultural products; 11) calculation of the total cost of marketable products from crop production, livestock farming, and industrial production by adding sales expenses to the production cost.

In the calculation of actual cost (unlike the calculation of planned cost), the following are also taken into account:

• losses from defective products;
• losses from downtime due to internal production reasons;
• shortages of material assets in production and in warehouses in the absence of responsible parties;
• allowances for loss of ability to work due to occupational injuries, paid on the basis of court decisions;
• payments to employees released from enterprises due to their reorganization or staff reduction.

As noted above, not all enterprise expenses are costs included in the cost of products (works, services). For example, the following are not included:

• costs for construction, equipment, and maintenance of cultural and welfare facilities on the enterprise's balance sheet;
• costs for the creation of new technologies and the improvement of those currently in use, as well as costs for improving product quality related to scientific research, experimental design work, and production re-equipment;
• costs for health protection and recreation activities covered by funds allocated for social needs;
• costs for the creation and improvement of management systems and tools;
• expenses related to the maintenance of educational institutions and the provision of free services to them;
• loan payments exceeding the interest rate established by legislation.

There are also corresponding cost categories, the composition of which is established by the Methodological Recommendations on the planning, accounting, and calculation of product cost (works, services) in agriculture:

• all wage payments based on piece rates, tariff rates, and official salaries in accordance with the remuneration system adopted at the enterprise, as well as bonuses, premiums, and payments for cost savings from the wage fund;
• the value of products issued to employees as payment in kind;
• compensatory payments related to labor remuneration.

Labor costs are directly included in the costs for the relevant livestock animals and types of production of other industries. This item also reflects contributions to social funds, including.

The item "Seed and planting material" includes costs for seed and planting material, both own-produced and purchased, excluding young perennial plantations, the establishment of which is financed through capital investments. Expenses for seed treatment prior to sowing and their transportation are not included in the cost of seed, but are attributed to the relevant cost items for crops.

The item "Mineral and organic fertilizer" includes costs for applied organic and mineral fertilizer. Expenses for preparation, loading, transportation, unloading, hauling to the field, and loading into spreaders are not included in this item, but are attributed directly to the costs.

The item "Plant and animal protection products" includes costs for the acquisition and storage of various seed treatments, herbicides, and other chemical and biological agents for controlling weeds and plant diseases, as well as the cost of biological preparations, medicines, and disinfectants purchased at the enterprise's expense. This item does not include the cost of preparations purchased through budget allocations, nor does it include expenses for crop spraying with these agents, which are reflected in the corresponding items.

The Feed item reflects costs for own-produced and purchased feed, including expenses for its internal movement. Costs for feed preparation in feed processing units are also attributed to this item and distributed among types of livestock animals in proportion to the mass of prepared feed.

Costs for transporting feed to farms from their storage locations are not included in this item, but are distributed among the relevant cost items for livestock production.

The Raw materials for processing item reflects costs for raw materials and supplies used for production or as necessary components for manufacturing. For example:

• cost of grain, grass meal, micro-additives, etc., in the production of compound feed;
• cost of flax straw and retted flax in the primary processing of flax;
• cost of livestock animals, poultry, etc., in the slaughterhouse;
• cost of grapes, fruits, alcohol, citric acid, sugar, etc., in wine production;
• cost of milk, sugar, vanillin, etc., in dairy production;
• cost of grain in milling production.

Own-produced products are included in costs at the actual (planned) cost, taking into account transportation expenses for delivery.

The Maintenance of fixed assets item includes costs for the maintenance of fixed assets used directly in production:

• labor payment (with accruals) for personnel maintaining the fixed assets;
• costs for fuel and lubricants;
• depreciation charges for full recovery, attributed to the given crop or type of animal, based on the book value of these assets at established rates;
• costs for all types of repair of fixed assets.

Costs for the maintenance of fixed assets used in crop production (including rent in the form of depreciation charges) are attributed to the cost of crops and types of work-in-progress in the following order:

Costs for the maintenance of fixed assets in livestock farming (including rent in the amount of depreciation charges), as a rule, are directly attributed to the costs of maintaining the relevant types of livestock animals.

Costs for the maintenance of fixed assets in auxiliary and subsidiary (industrial) production facilities are distributed by product type in proportion to the total labor costs of production workers.

The Works and services item reflects costs for works and services provided by auxiliary production units of the enterprise that meet production needs, as well as costs for production-related services rendered by third-party enterprises.

Auxiliary production units of an agricultural enterprise include: automotive freight transport; horse-drawn transport; transport works performed by the enterprise's tractors; production units and services for electricity, heat, water, and gas supply, and refrigeration; repair and mechanical workshops (if they are not separated in the balance sheet as subsidiary industrial enterprises).

Transport costs are distributed among cost calculation objects in proportion to the volume of cargo transportation work performed, measured in tonne-kilometers or conventional standard hectares.

The "Organization of production and management" item reflects general production and general economic expenses. General production expenses (brigade, farm, workshop level) include:

How to properly allocate indirect and general farm expenses

Accurate calculation of production cost in crop production and livestock depends on the correct allocation of overhead costs. While direct expenses for seed or fuel are easy to account for, costs related to management, occupational safety, and maintenance of general-purpose machinery require a clear methodology. Errors at this stage distort the real financial picture of individual teams, farms, and workshops.

Expenses under the heading "Organization of production and management" are planned and recorded separately by industry — in crop production, livestock, and other production lines. They are charged to the production cost of the subdivision where they arose, as well as to the cost of work and services for third-party departments of the enterprise. These expenses include:

• remuneration of the management staff and subdivision personnel, including social security contributions;
• depreciation, maintenance, and repair costs for general-purpose fixed assets;
• occupational health and safety measures;
• wear and tear of low-value and short-lived items;
• a portion of the rent for general production fixed assets exceeding the depreciation amount;
• other management and production organization costs in relevant departments.

These expenses are allocated in proportion to the total amount of the subdivision's direct costs. When calculating the allocation base, the cost of seed, feed, raw materials, supplies, and semi-finished products must be excluded from the total direct costs.

General administrative expenses, which relate to the management of the enterprise as a whole, are formed separately. These include the salaries of administrative and management personnel with contributions, travel expenses, office and postal/telegraph expenses, and depreciation and repair of general-purpose fixed assets. This also includes costs for fire safety, employee transport services, professional training with time off from work, payment for study leave, and social benefits.

Accounting for loan interest, livestock mortality, and other costs

Interest payment costs for the use of borrowed funds are recorded separately throughout the year as part of general administrative expenses. They are then allocated by product type in proportion to the sum of direct production costs.

Losses from the death of young stock and adult livestock being fattened, poultry, fur-bearing animals, rabbits, and bee colonies are recorded under the heading "Losses from livestock mortality." This heading excludes damages subject to recovery from guilty parties and losses arising from natural disasters.

The "Other costs" heading is charged directly to the production cost of specific crops, groups of crops, or animal species. It includes:

• wear and tear of special clothing and footwear for farm workers (excluding veterinary staff and guards);
• costs for animal bedding (straw, peat moss, sawdust);
• expenses for artificial insemination of livestock;
• costs for fencing farms, construction of sanitation facilities, and veterinary-sanitary structures;
• costs for the repair of summer camps, sheds, and other non-capital structures.

• Amortization period for non-capital object repairs — in equal installments up to 3 years
• Limit for including loan interest — within the Central Bank of the RF rate