Cost accounting
description
Transcript of Cost accounting
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Cost accounting
Introduction
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COST - MEANINGCost means the amount of
expenditure ( actual or notional) incurred on, or attributable to, a given
thing.
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COST ACCOUNTING - MEANING
Cost accounting is concerned with recording, classifying and
summarizing costs for determination of costs of
products or services, planning, controlling and reducing such costs and
furnishing of information to management for decision
making
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COST
MATERIALS LABOUR
OTHER EXPENSES
DIRECTDIRECT DIRECT
INDIRECTINDIRECT
INDIRECT
OVERHEADS
FOH AOH SOH DOH
ELEMENTS
OF
COST
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MATERIAL: The substance from which the finished product is made is known as
material.
Direct material is one which can be directly or easily identified in the product Eg: Timber
in furniture, Cloth in dress, etc.
Indirect material is one which cannot be easily identified in the product.
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Examples of Indirect material
At factory level – lubricants, oil, consumables, etc.
At office level – Printing & stationery, Brooms, Dusters, etc.At selling & dist. level – Packing materials, printing & stationery,
etc.
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LABOUR: The human effort required to convert the materials into finished product is called labour.
DIRECT LABOUR is one which can be conveniently identified or attributed wholly to a
particular job, product or process.Eg:wages paid to carpenter, fees paid to tailor,etc.
INDIRECT LABOUR is one which cannot be conveniently identified or attributed wholly to a
particular job, product or process.
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Examples of Indirect labour
At factory level – foremen’s salary, works manager’s salary, gate
keeper’s salary,etcAt office level – Accountant’s salary,
GM’s salary, Manager’s salary, etc.At selling and dist.level – salesmen salaries, Logistics manager salary,
etc.
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OTHER EXPENSES are those expenses other than materials and labour.
DIRECT EXPENSES are those expenses which can be directly allocated to particular job, process or product. Eg : Excise duty, royalty, special hire
charges,etc.
INDIRECT EXPENSES are those expenses which cannot be directly allocated to particular job,
process or product.
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Examples of other expenses
At factory level – factory rent, factory insurance, lighting, etc.
At office level – office rent, office insurance, office lighting, etc.
At sales & dist.level – advertising, show room expenses like rent,
insurance, etc.
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How to treat the following?
• Carriage
• Packaging expenses
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COST SHEET
DIRECT MATERIALDIRECT LABOUR
DIRECT EXPENSES
PRIME COSTFACTORY OVERHEADS
FACTORY COSTOFFICE OVERHEADS
COST OF PRODUCTIONSELL & DIST OVERHEADS
COST OF SALESPROFIT
SALES
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COST SHEET - ADVANCED
OPENING STOCK OF RAW MATERIALS+PURCHASES
+CARRIAGE INWARDS-CLOSING STOCK OF RAW MATERIALS
VALUE OF MATERIALS CONSUMED
+DIRECT WAGES+DIRECT EXPENSES
PRIME COST
+FACTORY OVERHEADS+OPENING STOCK OF WIP-CLOSING STOCK OF WIP
FACTORY COST
(CONT.)
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FACTORY COST
+ADMINISTRATIVE OVERHEADS
COST OF PRODUCTION+OPENING STOCK OF FINISHED GOODS-CLOSING STOCK OF FINISHED GOODS
COST OF GOODS SOLD
+SELL. & DIST. OVERHEADS
COST OF SALES+PROFIT
SALES
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COST CLASSIFICATION – ON THE BASIS OFNature
FunctionDirect & indirect
VariabilityControllability
NormalityFinancial accounting classification
TimePlanning and control
Managerial decision making
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ON THE BASIS OF NATURE
• MATERIALS
• LABOUR
• EXPENSES
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ON THE BASIS OF FUNCTION
• MANUFACTURING COSTS
• COMMERCIAL COSTS – ADM AND S&D COSTS
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ON THE BASIS OF DIRECT AND INDIRECT
• DIRECT COSTS
• INDIRECT COSTS
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ON THE BASIS OF VARIABILITY
• FIXED COSTS
• VARIABLE COSTS
• SEMI VARIABLE COSTS
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ON THE BASIS OF CONTROLLABILITY
• CONTROLLABLE COSTS
• UNCONTROLLABLE COSTS
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ON THE BASIS OF NORMALITY
• NORMAL COSTS
• ABNORMAL COSTS
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ON THE BASIS OF FIN. ACC
• CAPITAL COSTS
• REVENUE COSTS
• DEFERRED REVENUE COSTS
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ON THE BASIS OF TIME
• HISTORICAL COSTS
• PRE DETERMINED COSTS
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ON THE BASIS OF PLANNING AND CONTROL
• BUDGETED COSTS
• STANDARD COSTS
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ON THE BASIS OF MANAGERIAL DECISION MAKING
• MARGINAL COSTS
• OUT OF POCKET COSTS
• SUNK COSTS
• IMPUTED COSTS
• OPPORTUNITY COSTS
• REPLACEMENT COSTS
• AVOIDABLE COSTS
• UNAVOIDABLE COSTS
• RELEVANT AND IRRELEVANT COSTS
• DIFFERENTIAL COSTS
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TERMS IN COST ACCOUNTING• COST UNIT
• COST CENTRE
• COST ESTIMATION
• COST ASCERTAINMENT
• COST ALLOCATION
• COST APPORTIONMENT
• COST REDUCTION
• COST CONTROL
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METHODS OF COSTING• JOB COSTING
• CONTRACT COSTING
• BATCH COSTING
• PROCESS COSTING
• UNIT COSTING
• OPERATING COSTING
• OPERATION COSTING
• MULTIPLE COSTING
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TYPES OF COSTING
• UNIFORM COSTING
• MARGINAL COSTING
• STANDARD COSTING
• HISTORICAL COSTING
• DIRECT COSTING
• ABSORBTION COSTING