Accounting

What Are Producing Department And Service Department

What are producing department and service department? Division of the factory into separate, interrelated, and independently governed units is important for the proper control of factory overhead and the accurate costing of jobs and products.

Producing departmentThe number of producing department used depends on the emphasis the cost system puts on cost control and the development of overhead rates. If the emphasis is on cost control, separate departments might be established for the plant manager and for each superintendent, supervisor, and foreman.

When the development of  departmental overhead rates emphasizes accurate costing, fewer departments might be used. Sometimes the number of departments needed for cost control is larger than that needed for overhead rates. In such cases, the cost control system can be adapted to proper overhead rates by combining departments, thus reducing the number of rates used without sacrificing control of costs.

In certain instances, particularly when different types of machines are used, departments are further subdivided for cost control and overhead rate purposes, resulting in a refinement in overhead control and in application to the jobs or products passing through a department.

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