WELCOME TO ALL OF YOU Costing - By RAHUL JAIN (Striving for excellence) BCOM (H), MBA, FCS.
-
Upload
milton-ryan -
Category
Documents
-
view
216 -
download
0
Transcript of WELCOME TO ALL OF YOU Costing - By RAHUL JAIN (Striving for excellence) BCOM (H), MBA, FCS.
Cost
Any amount incurred during the operations for providing the good or service to get the output into the hands of the customer
Controlling costs is essential to business success
A sacrifice of resources.
Computing the cost of providing a service or manufacturing a product
Determining the behavior of costs and expenses as activity levels change
Profit planning and budgeting Controlling Management decision making
Need of Costing
Examples of Decisions
Suppose you manufacture five type of garments. Should you add another product line, or drop a line, and underwhat
circumstances? What information do you need?
Suppose you are planning for the upcoming year, and you need to determine how many units to sell to breakeven, or to make a target profit figure. What information do you need?
Key terms
Direct costs are costs that can be directly related to producing the products and services .
Indirect costs are costs that are not directly related to the products or services , but are indirectly related to them.
Key terms
Opportunity cost What you give up for certain in exchange for a chance at
something better.
Interest The cost of borrowed money
Key terms
Cost Object Any activity or item for which a separate measurement of costs is desired. Cost objects are the “something” in the statement: “We
need the cost of ‘something’”!
Product costs = Sum total of Direct costs and Indirect Allocated cost
Costs Fixed – are not influenced
by the amount produced but can change in the long run e.g., insurance costs, administration, rent, some types of labour costs (Salaries)
Variable– vary directly with the amount produced, e.g., raw material costs, some direct labour costs.
Semi-fixed – where costs not directly attributable to either of the above, for example, some types of energy and labour costs
COST OF THE GARMENT
Direct Costs Indirect Costs
Direct Material Cost(Fabric, trims, packaging
material)
Direct Labor Costs(Wages paid to operating labor i.e.workers associated directly
to the production)
Other expenses (Cost of outsourcing, inward
carriages etc.)
Indirect Material Cost(Printing, stationery & etc.)
Indirect Labor Cost(Wages paid to store keeper, supervisors, and salaries of
other officials)
Indirect expenses(Rent, Depreciation, lighting,
insurance charges)
Prime cost -ExampleCONTENT AVG. CONSUMPTION/ SHIRT AVG.PRICE/UNIT
(Rs.)TOTAL COST(Rs.)
Fabric 2.10mts. 56 117
Thread 200mts. 9/spool 4.5
Button 11pcs. 0.25 2.75
Label 3pcs 0.20 0.60
Polybag 1pcs 2.10 2.10
Collar band card board 1pcs 0.10 0.10
Card board 1pcs 0.80 0.80
Clips 4 pcs 0.10 0.40
Pin 8 pcs. 0.05 0.40
Butterfly 1 pcs. 0.35 0.35
collarbone 2 pcs. 0.25 0.50
fusing 25 cm 30/mt 7.50
Direct Labor cost35.66 35.66
Direct expenses 11 11
Prime cost 219.21
Pricing and Cost
Gross Margin= ASP-Product Cost
Gross Margin%= Gross Margin/Asp*100
Mark Up= (ASP-Product Cost)/Product Cost
Or ASP= Product Cost + Mark UpI. M. Pandey, Financial
Management, 9th ed., Vikas. 15
Exercise-IClassify the cost items as direct or indirect , fixed or variable or semi fixed.
a. Salary of the production department manager who oversees manufacturing.
b. Salaries of company founders.
c. Cardboard trays used to package sets of garmentsd. Salary of the Web graphics designer who prepares the online illustrations and layout. e. Annual maintenance service agreement for the conveyer belt. f. Wages paid to laborg. Utilities such as water, electricity, waste for the warehouse. h. Cost of ingredients
Assignment
Individual Assignment
Write Key learnings/Reflections of the class, Ex 1 of PPT Questions of the Costsheetassignment.xls (Excel
file): Up till Prime cost only.
Some important points
Academic Honesty Reference Any Source When Confused Ask InstructorContact me: Rahul Jain (9811228852,
[email protected], Yahooid:rahulkjain16)
www.learningcosting.pbworks.com