The influence of the base product in the unit of production effort method: analysis and discussion

Abstract

In this article it is analyzed and discussed if the choice of the base product of the unit of production effort (UPE) method interferes with the computed unit cost of the products. The selection of the base product is at important step in this costing method. In order to carry out this study, real data was used from a food company in the state of Santa Catarina (Brazil). The results obtained show that, irrespective of the base product chosen, there is no change in the final value allocated to each product in terms of conversion unit cost. In this way, the main contribution of the study is to prove, mathematically, the neutrality of this method in terms of the product chosen to be the base product, because it does not effectively change the value assigned each product. The results obtained can be replicated in other types of companies and industries. Additionally, we present and discuss some opportunities for future work aligned with the application and development of the proposed method.