Production service department definition
/What is a Production Service Department?
A production service department is a group within a factory that does not directly manufacture goods; instead, it provides services to other parts of the factory. These service-focused groups are essential to the operation of a factory, despite their indirect impact on the production of goods.
Examples of Production Service Departments
Here are several examples of production service departments within a factory:
Maintenance department. This department is responsible for keeping all machinery and equipment in optimal working condition. They perform regular inspections, repairs, and preventative maintenance to minimize downtime and ensure smooth production processes.
Quality control department. Focused on maintaining product standards, this department inspects raw materials and finished goods to ensure they meet quality specifications. They also conduct testing and implement quality assurance protocols to prevent defects.
Engineering department. This team designs and optimizes production processes, equipment layouts, and workflows. They also work on continuous improvement projects to enhance efficiency and reduce production costs.
Logistics and materials handling department. Responsible for managing the flow of materials within the factory, this department handles receiving, storing, and distributing raw materials and components to different production areas. Efficient logistics ensure that production lines are never delayed due to material shortages.
Tooling department. This department designs, manufactures, and maintains the specialized tools and dies needed for production. They ensure that tools are precise and available when needed, supporting the efficiency and quality of manufacturing operations.
Accounting for a Production Service Department
The cost of production service departments is included in factory overhead, which is then charged to the number of units produced within the reporting period. For example, if the cost of a production service department in January is $50,000 and 100,000 units were produced in January, then $0.50 of the cost of the service department will end up being allocated to each unit produced. If these units are sold in January, then the cost of the service department will appear in the income statement within the cost of goods sold section in that month. If the units are not immediately sold, then the cost of the service department will instead be recorded as an inventory asset on the balance sheet, until such time as the units are sold.
Examples of a Production Service Department
Examples of a production service department are the maintenance, janitorial, and quality assurance groups.