Cost-Accounting

COST ACCOUNTING: 

COST ACCOUNTING

WHAT IS COSTING : 

WHAT IS COSTING Costing is the technique and process of ascertaining costs. It is referred to as classifying recording and appropriate allocation of expenditure for the determination of costs of products or services.

What is cost Accounting: 

What is cost Accounting Weldon Defines Cost accounting as “ the classifying, recording and appropriate allocation of expenditure for the determination of costs of products or services, the relation of these costs to sales value and the ascertainment of profitability”

Objectives and Functions of Cost Accounting: : 

Objectives and Functions of Cost Accounting: 1) Ascertainment of Cost: 2) Cost control and Cost Reduction: 3) Guide to Business Policy: 4) Determination of Selling Price: 5) Fixing profit per products.

Importance of Cost Accounting: 

Importance of Cost Accounting Detailed Cost information Help in price fixation Reveals profitable or non profitable activity Reveals idle capacity Helps in decision making Helps in controlling costs Cost comparison Helps in inventory control

Methods of costing: 

Methods of costing 1) Job order costing : Costs are collected for each job/ work/ project separately. Where production is not repetitive. Example: Printing, machine tool manufacturing. 2) Contract costing : A contract is a big job and is spread over a period of time. This costing applicable to builders. Dams, bridges and roads. 3) Batch costing: it is extension of job costing. A batch consists of number of similar products. the cost of group of products constituting the batch Example: drugs, cigrates , clothing, medicines etc..

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4) Process costing : this method is used in mass production industries manufacturing standard products in continues process of manufacturing. To arrive cost per unit, the total cost of a process is divided by no of units produced. Example: car manufacturing, refineries, sugar manufacturing etc. 5) Operational costing : it is nothing but refinement and more detailed application of process costing. It involves ascertainment for each operation instead of process. Example: mines, steel production etc. 6)_ Service costing : where services are being provided rather than goods manufactured. Example: hospital, hotel , education industries etc

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7) Single, or output or unit costing : used when production is uniform and consists of a single or two or more varieties of same products. Where product is produced in different grade. Example: car manufacturing, steel production 8) Service costing : it is used in undertaking which provide services instead of manufacturing products. Example: transport co, electricity co. 9) Multiple or Composite costing : this method used in industries where a number of components are separately manufactured and then assembled into final product. Example: television set manufacturing

Techniques of costing: 

Techniques of costing 1) Standard costing 2) Budgetary costing 3) Marginal costing 4) Total absorption costing 5) Uniform costing

Classification of cost: 

Classification of cost A) Classification by degree of traceability to product direct costs: Indirect costs B) Classification by chnages in activity into fixed and variable costs: fixed cost: variable cost: semi variable or semi fixed costs:

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C) C lassification by association with product product costs Period costs D) classification by controllability controllable cots: non-controllable costs E) Classification by time historical costs pre-determined costs

Special costs for Management Decision making: 

Special costs for Management Decision making Marginal Cost Sunk costs Imputed or notional Cost Differential Cost Out-of -pocket cost (explicit Cost) Implicit Cost Avoidable Cost and unavoidable Cost

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Classsifcation on basisi of planning and Control Budgeted Costs Standard Costs Classification by nature of elements Material Labour Overheads

Elements of cost: 

Elements of cost Cost divided in to 3 parts. 1) material. 2) labour. 3) expenses. 1) Material cost: divided into 2 parts. a) direct material: cost is that which can be conveniently identified with and allocated to cost units. Direct material generally become a part of the finished products. Example: leather in shoes, steel in machines.

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COST MATERIALS LABOUR OTHER EXPENSES DIRECT DIRECT DIRECT INDIRECT INDIRECT INDIRECT OVERHEADS FOH AOH SOH DOH ELEMENTS OF COST