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Cost Sheet Final Document

Cost Sheet Final Document

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Published by abhi
Costing
Costing

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Published by: abhi on Jan 30, 2009
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 MEANING OF COST  
‘COST’ represents a sacrifice of values, a foregoing or a releaseof something of value. It is the price of economic resources used as aresult of producing or doing the thing costed. It is the amount of expenditure incurred on a given thing. Cost has been defined as theamount measured in money or cash expended or other party transferred, capital stock issued, services performed or a liability incurred in consideration of goods and serviced received or to bereceived. By cost, we mean the actual cost i.e. historical cost. ICWA (UK) defines cost as the amount of expenditure (actual or notional)incurred on, or attributable to a specified thing or activity.
CLASSIFICATION OF COST 
Cost classification is the process of grouping costs according totheir common features. Costs are to be classified in such a mannerthat they are identified with cost center or cost unit.
ON THE BASIS OF BEHAVIOUR OF COST 
Behavior means change in cost due to change in output. On the basis of behavior cost is classified into the following categories:
 FIXED COST 
It is that portion of the total cost which remains constantirrespective of the output upto capacity limit. It is called as a periodcost as it is concerned with period. It depends upon the passage of time. It is also referred to as non-variable cost or stand by cost,capacity cost or “period” cost. It tends to be unaffected by variationsin output. These costs provide conditions for production rather thancosts of production. They are created by contractual obligations andmanagerial decisions. Rent of premises, taxes and insurance, staff salaries constitute fixed cost.
 
VARIABLE COST 
This cost varies according to the output. In other words, it is acost which changes according to the changes in output. It tends to vary in direct proportion to output. If the output is decreased, variable cost also will decrease. It is concerned with output orproduct. Therefore, it is called as a “product” cost. If the output isdoubled, variable cost will also be doubled. For example, directmaterial, direct labour, direct expenses and variable overheads. It isshown in the diagram
 
 below.
 SEMI-VARIABLE COST 
This is also referred to as semi-fixed or partly variable cost. Itremains constant up to a certain level and registers changeafterwards. These costs vary in some degree with volume but not indirect or same proportion. Such costs are fixed only in relation tospecified constant conditions. For example, repairs and maintenance
 
of machinery, telephone charges, supervision professional tax, etc.
ON THE BASIS OF ELEMENTS OF COST 
Elements means nature of items. A cost is composed of threeelements, material, labour and expenses. Each of these elements can be direct and indirect.
 DIRECT COST 
It is the cost which is directly chargeable to the productmanufactured. It is easily identifiable. Direct cost consists of threeelements which are as follows:
 
 DIRECT MATERIAL
It is the cost of basic raw material used for manufacturing aproduct. It becomes a part of the product. No finished productcan be manufactured without basic raw materials. It is easily identifiable and chargeable to the product. For example, leatherin leatherwares, pulp in paper, steel in steel furniture,sugarcane for sugarcane etc. what is raw material for onemanufacturer might be finished product for another. Directmaterial includes the following:

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Siva Prasad liked this
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do we deduct cash discount from cost sheet
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cost sheet is tha imprtance fanction of accounting
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